NOTE: Readers are asking to know who, in addition to the Western-financed NGOs, are the Fifth Columnists inside Russia. Michael Hudson and I left the description general as Atlanticist Integrationists and neoliberal economists. The Saker provides some specific names. Among the Fifth Columnists are the Russian Prime Minister, head of the Central Bank, and the two top economics ministers. They are springing a privatization trap on Putin that could undo all of his accomplishments and deliver Russia to Western control. http://thesaker.is/putins-biggest-failure/

Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.

However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014

Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia’s economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.

To be sure, President Putin set a number of conditions on February 1 to prevent new privatizations from being like the Yeltsin era’s disastrous selloffs. This time the assets would not be sold at knockdown prices, but would have to reflect prospective real value. The firms being sold off would remain under Russian jurisdiction, not operated by offshore owners. Foreigners were invited to participate, but the companies would remain subject to Russian laws and regulations, including restrictions to keep their capital within Russia.

Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw “hard cash” into the buyouts – ideally from the foreign currency holdings by oligarchs in London and elsewhere.

Putin wisely ruled out selling Russia’s largest bank, Sperbank, which holds much of the nation’s retail savings accounts. Banking evidently is to remain largely a public utility, which it should because the ability to create credit as money is a natural monopoly and inherently public in character.

Despite these protections that President Putin added, there are serious reasons not to go ahead with the newly-announced privatizations. These reasons go beyond the fact that they would be sold under conditions of economic recession as a result of the Western economic sanctions and falling oil prices.

The excuse being cited by Russian officials for selling these companies at the present time is to finance the domestic budget deficit. This excuse shows that Russia has still not recovered from the disastrous Western Atlanticist myth that Russia must depend on foreign banks and bondholders to create money, as if the Russian central bank cannot do this itself by monetizing the budget deficit.

Monetization of budget deficits is precisely what the United States government has done, and what Western central banks have been doing in the post World War II era. Debt monetization is common practice in the West. Governments can help revive the economy by printing money instead of indebting the country to private creditors which drains the public sector of funds via interest payments to private creditors.

There is no valid reason to raise money from private banks to provide the government with money when a central bank can create the same money without having to pay interest on loans. However, Russian economists have been inculcated with the Western belief that only commercial banks should create money and that governments should sell interest-bearing bonds in order to raise funds. The incorrect belief that only private banks should create money by making loans is leading the Russian government down the same path that has led the eurozone into a dead end economy. By privatizing credit creation, Europe has shifted economic planning from democratically elected governments to the banking sector.

There is no need for Russia to accept this pro-rentier economic philosophy that bleeds a country of public revenues. Neoliberals are promoting it not to help Russia, but to bring Russia to its knees.

Essentially, those Russians allied with the West—“Atlanticist Integrationists”— who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia’s control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests.

Despite some success in reducing the power of the oligarchs who arose from the Yeltsin privatizations, the Russian government needs to retain national enterprises as a countervailing economic power. The reason governments operate railways and other basic infrastructure is to lower the cost of living and doing business. The aim of private owners, by contrast, is to raise the prices as high as they can. This is called “rent extraction.” Private owners put up tollbooths to raise the cost of infrastructure services that are being privatized. This is the opposite of what the classical economists meant by “free market.”

There is talk of a deal being made with the oligarchs. The oligarchs will buy ownership in the Russian state companies with money they have stashed abroad from previous privatizations, and get another “deal of the century” when Russia’s economy recovers by enough to enable more excessive gains to be made.

The problem is that the more economic power moves from government to private control, the less countervailing power the government has against private interests. From this standpoint, no privatizations should be permitted at this time.

Much less should foreigners be permitted to acquire ownership of Russian national assets. In order to collect a one-time payment of foreign currency, the Russian government will be turning over to foreigners future income streams that can, and will be, extracted from Russia and sent abroad. This “repatriation” of dividends would occur even if management and control remains geographically in Russia.

Selling public assets in exchange for a one-time payment is what the city of Chicago government did when it sold the 75 year revenue stream of its parking meters for a one-time payment. The Chicago government got money for one year by giving up 75 years of revenues. By sacrificing public revenues, the Chicago government saved real estate and private wealth from being taxed and also allowed Wall Street investment banks to make a fortune.

It also created a public outcry against the giveaway. The new buyers sharply raised street parking fees, and sued Chicago’s government for damages when the city closed the street for public parades or holidays, thereby “interfering” with the rentiers’ parking-meter business. Instead of helping Chicago, it helped push the city toward bankruptcy. No wonder Atlanticists would like to see Russia suffer the same fate.

Using privatization to cover a short-term budget problem creates a larger long-term problem. The profits of Russian companies would flow out of the country, reducing the ruble’s exchange rate. If the profits are paid in rubles, the rubles can be dumped in the foreign exchange market and exchanged for dollars. This will depress the ruble’s exchange rate and raise the dollar’s exchange value. In effect, allowing foreigners to acquire Russia’s national assets helps foreigners to speculate against the Russian ruble.

Of course, the new Russian owners of the privatized assets also could send their profits abroad. But at least the Russian government realizes that owners subject to Russian jurisdiction are more easily regulated than are owners who are able to control companies from abroad and keep their working capital in London or other foreign banking centers (all subject to U.S. diplomatic leverage and New Cold War sanctions).

At the root of the privatization discussion should be the question of what is money and why should it be created by private banks instead of central banks. The Russian government should finance its budget deficit by having the central bank create the necessary money, just as the US and UK do. It is not necessary for the Russian government to give away future revenue streams in perpetuity merely in order to cover one year’s deficit. That is a path to impoverishment and to loss of economic and political independence.

Globalization was invented as a tool of American Empire. Russia should be shielding itself from globalization, not opening itself to it. Privatization is the vehicle to undercut economic sovereignty and increase profits by raising prices.

Just as Western-financed NGOs operating in Russia are a fifth column operating against Russian national interests, so are Russia’s neoliberal economists, whether or not they realize it. Russia will not be safe from Western manipulation until its economy is closed to Western attempts to reshape Russia’s economy in the interest of Washington and not in the interest of Russia.

When two preeminent economists like Michal Hudson and Paul Craig Roberts take the time to jointly issue a stark warning to the Kremlin President Putin really ought to pay attention. The combined wealth of knowledge and experience of Hudson and Roberts is simply unparalleled and their record clearly shows that they both are friends of the Russian people. I honestly believe that to ignore their warning would be absolutely irresponsible.

I fully agree that the latest privatization plan is a direct attack by the Russian 5th column against President Putin and against Russia. Roberts and Hudson put it perfectly:

“Those Russians allied with the West—“Atlanticist Integrationists”— who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia’s control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests“.

Putin cannot wait much longer. He needs to take action now. All his supporters have been literally begging Putin to finally purge the government from what in Russia is called the “economic block of the government”. There are plenty of excellent Russian economists capable of *truly* begin to reform the Russian economy (Glaziev) and most of the Russian business community will enthusiastically support such reform. But the first step in this process must be to finally take action against the Atlantic Integrationists. Now.

The Saker

The Essential Saker: from the trenches of the emerging multipolar world

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242 Comments

It is to be hoped that Russia’s top leadership, including the Duma members, will see and read this article. It’s translation (to Russian) would be advisable.

Yes, Russia, and all nations that wish to remain, or become Sovereign, and, most importantly, control their economies, and their credit, must keep their Banks (specially), and other key economic (such as industrial and control of natural resources), enterprises, under Public control.

Lovely and Loving advice for Russia. And good advice for all peoples’ nations!

I am also waiting to see what Vladimir Putin does sooner, rather than later.

In case V. Putin or others around him (including Glazyev, Starikov …) might read this website, I have a proposal that might seem baffling at first.
But, if you think more about it, it’s probably the best way to create and maintain a monetary system which cannot be abused too much and which naturally provides the required elasticity for an expanding or shrinking economy.
First, let me quickly point the biggest problem of
1- a gold backed monetary system or
2- a fractional reserve fiat system

Gold on its own has very little intrinsic value (even for industry), except that many people (especially women) are craving to wear it because they were indoctrinated in childhood. And by the way, the same thing is valid for diamonds. The world is literally filled with diamonds, but the market is cornered by the Oppenheimers.

One advantage that gold had from the old times is that you cannot counterfit it.
However, let’s assume a country has a finite amount of gold and that population+economy of that country doubles in 50 years. It’s easy to understand that more money will be needed for the extra population and the extra amount of goods in circulation. But the gold is the same, so the price of it will double. Therefore, people will feel that is better to accumulate gold instead of doing some business. This will strangle the economy leading to depression.

In the past, because population and economies were growing so slow, no one within a generation would have realized that gold is a stopping element. On top of it, the world kept extracting it.

So, fair enough, gold is good to prevent bankers from creating fake currency, but it’s not good for economies like today when high technology is booming, there more services every 5 years that people want (internet, software, plastic surgery, movies, music concerts and albums … think about … they all need extra money to be paid with … compared with a shelter, some food and some clothes just 300 years ago).

Therefore, a monetary system that allows to expand the money supply as the economy and population grows, it’s much better, if it’s done in good faith. That’s, amongst others, one of the reasons why the British Empire flourished so well for 2 centuries.
However, as we can see, the fiat monetary system got abused after the FED was created in 1913. Not so much in the first 50 years, but much more lately.

So, what system to chose between the two ?

How about a system in which the money is a contract or legally binding piece of paper based on which one can get a CERTAIN AMOUNT OF ENERGY ??? Not petrol or gas, or grains or salt … but a certain number of kWhour or Joules.
These units of energy are there set in the laws of the Universe, no banker in the world can play scams anymore.
Plus, most of the goods and services created by humans can be scientifically related to the energy spent to create them (so pricing can be proven scientifically).
For example, a piece of bread needs the energy required for the crops to grow, to be harvested …. to be milled and then finally baked into a loaf. Eventually, we add the energy needed for transporting that bread into the shelves of a store.
Also, if someone needs to heat his house, he can pay for it using legally binding notes that will allow him to get a certain number of kWh from a state or company.

Countries can exchange these “money” or notes in forms of energy (electrical, caloric). This will be equivalent to the settlements performed today in Basel. Just that we can bypass Basel and their magic (corrupt) methods of establishing exchange rates. It’s through that Basel+FED scam that some countries have a “strong currency” while others are falling down in the abyss of inflation.

If V. Putin will create such a system, he can be the hero to placed humanity on a path of progress never seen before.

Let’s think now what happens if there is “oversupply of energy” (because of new hydro-plants, for example). Instead of the price of energy to drop, like it happens in a corrupt fiat system, more energy notes can be issued and economy will be stimulated with the real food = energy. People and businesses will be motivated to expand and burn that surplus.
If energy becomes scarce because there is no more water in the hydro-plants or natural gas, the economy will also shrink to a sustainable level.

I think this proposal takes the international banking mafia out of the game. But most important, it opens the eyes of entire humanity to become aware about another method of trading. This eliminates speculation and promotes a fairness.

In terms of countries implementing this, it’s almost the same as we think today, just replace the reserves in dollars with reserves in kWh that a certain country can provide when the settlement date comes. Beside kWh, it can be any other form of basic energy converted to kWh by using standard physical laws: thermal energy, oil (energy value),

Aw, its not happening, Russia is moving in the wrong direction and will continue to move in the wrong direction, I secretly held out that “Putin had a plan”, that he was “sskillful maneuvering himself in the right position to strike” but it seems he does not.

For true change to happen there seems to need to be a power change, either a coup or the military take over or another party takes over. Putin is good, very good, but he sadly he will not do what it takes. I even heard that Putin wished to join NATO initially, it seems to me many of the good things for Russia indepedance he has done not because he wishes Russia to distance itself from the west and develop independently, but because the west rejects Russia.

Fully agreed.
They did the same (almost) everywhere, in 1994 and since in Germany, from 2002 or what it was on in Poland, since last October they split the Serbian Railways into such small fractions competing with each other.

This all lead and leads to: More unemployment, higher customer prices, more railway lines closed down and back to start. A deadly cycle.

I first heard about the privatization plans for the RZD 3 days ago in a german railways forum. Just when I wanted to write a longer comment about the situation I saw that Saker already is aware of the subject and published his article.

It must be prevented under all circumstances!!!
So called “Privatization” has destroyed all of Eastern Europe since 1989.
What remains are de-industrialized empty lands or “new markets” how the Oligarchs would say.”””””

But I noticed that almost or not even almost _no_body helps me here.
Maybe that tard is right: A pity for my energy and time.

Russia cannot move away from the dollar and survive until China is fully onboard. Some time ago I read that the AIIB would be lending only in US dollars which did not sound good. Now this article by Engdahl and also Putin even considering privatisations?

The talk of privatisations in Russia, what is happening with China and the AIIB/IMF, Obama/Kerry’s recent diplomacy (Iran nuke deal, talk of drooping sanctions against Russia ect), I think are all part of a concerted US effort to keep the dollar at number one.

Their hand may be forced, in an ironic twist, to ‘do something’ and that will in fact deliver a coup de grace to the dollar.

I suspect for long time now is they are scared sh!tless to start/conduct any major war lest some kickass wildfire start in either/and the dollar & bond market.

If you can find a long-term chart multi-decade of either US treasury bond yields, or the inverse bond value per $100 issued face value, look at right exactly January 1968—there was a huge inflection point jump from a slow rise to a near parabolic rise in rates demanded by the market, & an inverse collapse in bond prices that didn’t stop till late 1981.

What happened right in there around then? Tet offensive Vietnam end of January/68.

Which all the vainglorious cheerleaders wrote as propaganda was a victory for the side of freedom.
World money markets said opposite, a run on US debt because all those tens of billions issued to then hadn’t bought or guaranteed sh!t!.

Since 1971 its intrinsic value has been zero, so how long can they continue to issue dollars & bonds by the cubic cubit & expect it to keep its same value?

Yeah I know that everybody is cheering the AIIB and the BRICS NDB, but so far they are not as the alternative sites are presenting them. AIIB has decided that its first project w/b a co-project w its Western rival, the Asian Development Bank.
China’s argument w the West is just that it wants more votes for iself & BRICS– so that they will have more power w/in the present IMF/Fed structure.

If Michael Hudson’s Modern Monetary Theory were put in place China & the BRICS would not merely be adding their hands to the leash which is strangling sovereign countries everywhere. Nor would lending thru either IMF or AIIB be quite the engine for development that IMF fails to be today. Nations wd in many cases be creating their OWN credit. That’s the revolution. It’s the NDB that’s using dollars. Only if nations become sovereign again is their any hope that citizens can regain control over them & their govt’s monetary and trade policies– forever unreachable if seated in some supranational institution.
If you want info on AIIB or NDB, etc, I’m sure GlobalResearch.ca has at least one article on each.

@ anonymous: Hudson, though he is affiliated with UMKC is not an MMT proponent. MMT theory does not reform the current monetary system, believes that debt-free money cannot exist and is an impedement to teal monetary reform. I suggest you take time to read Dr. Joseph Huber’s critique of MMT. Or actually attempt to understand what MMT Theory is all about.

The above comment is nonsense. Of course I support MMT, and my colleagues Randy Wray and Stephanie Kelton. People who talk of “debt free money” don’t understand that balance sheets have a liabilities side as well as an asset side. Randy Wray’s books will walk them through this.

I want to share with you tragic news. The
Bloomberg agency exposed the cunning plan of
Vladimir Putin and reported about it to the
whole world. The American journalists came to a
conclusion that Putin isn’t going to sell the state
enterprises to foreign investors, and after all
they so hoped for opportunity to buy any sweet
state asset on cheap stuff.
And the Bloomberg agency found out that
foreign investors don’t trust Putin. On this place,
probably, it is supposed that the Russian reader
has to be hung up literally from melancholy, but
I for some reason don’t want to do it.
Foreign investors even can sympathize. They
with excitement watched some months efforts
of the government on advance of a new wave of
privatization, and, probably, it seemed to them
that the happiness is so close, but the fiasco
turned out.
Conditions which were laid down by Vladimir
Putin for privatization of minority packages of
public industries, frightened off many
representatives of the Western financial world.
Actually Putin put the ideal filter which doesn’t
allow the western speculative capital to
privatization.
The president insists that the structure which is
in the Russian legal framework can only be the
buyer of minority packages and it is the major
aspect. The noisy, but badly understanding law
inhabitants of social networks already branded
this condition, having declared it the cheap PR
course, after all stirs nothing foreign or even the
offshore company to found the Russian open
company and to participate in privatization at
formal observance of all conditions.
Yes, it so, but here foreign speculators well
understand a problem: if shares are taken by
the Russian company in the Russian legal
framework, and all subsequent conflicts to the
state or potential expropriation will decide in the
Russian legal framework and with the Russian
open company as the participant of judicial
proceedings. Repetition of a situation with
“Yukos” which actions belonged to the offshore
foreign companies is already impossible.
It turns out that in this situation only those
foreign investors who aren’t afraid of the
Russian courts will participate in privatization
and aren’t afraid to play in everything by rules
of the Russian state. Those who wanted to
hapnut an asset on cheap stuff to sell and run
away, are eliminated, washing bitter with tears
pages of “Bloomberg”, “Sheets” and “Gazeta.ru”.
It would seem, foreigners have to whine with
envy in relation to the Russian oligarchs, after all
each Internet patriotic knows that a new round
of privatization — this plunder of the country.
However foreign journalists and financiers are
able to work with the calculator and are able to
penetrate into details.
In fact, it turned out so: that thought the
government as sale of assets at any price,
turned in peculiar “coercion to investments” for
those oligarchs who want to work in Russia. The
source of Reuters agency which, according to
the statement of agency, “is close to
privatization process”, claims that oligarchs
minority equity stakes at the price above market
will force to redeem, and operation is performed
within the program for return of the oligarchical
capitals To Russia.
Control of the companies remains in hands of
the state what Putin accurately declared. On the
sum of factors it turns out that oligarchs money
in the budget forces to pour right now, and also
to invest in those companies, whose minority
shareholders they will become. In an exchange
they receive hope that when national economy
considerably will grow, they will be able to count
on certain dividends or on opportunity to sell
the package at higher price. This scheme has
one more positive side effect. It will connect
interests of business elite with health of the
Russian economy and the state enterprises that
can’t but please.
It is good that we have a president – the judoist
wizard who uses even the most dangerous
proposals of our liberals to improve a situation
in the country. And that the essence of some
actions should be read in comments of foreign
mass media while the state and allegedly
patriotic editions are occupied with fascinating
discussion of details of the relations of the goat
Timur and the tiger Amur is bad at us.
Systematically failure information policy can cost
very much to us.

I want to share with you tragic news. The
Bloomberg agency exposed the cunning plan of
Vladimir Putin and reported about it to the
whole world. The American journalists came to a
conclusion that Putin isn’t going to sell the state
enterprises to foreign investors, and after all
they so hoped for opportunity to buy any sweet
state asset on cheap stuff.
And the Bloomberg agency found out that
foreign investors don’t trust Putin. On this place,
probably, it is supposed that the Russian reader
has to be hung up literally from melancholy, but
I for some reason don’t want to do it.
Foreign investors even can sympathize. They
with excitement watched some months efforts
of the government on advance of a new wave of
privatization, and, probably, it seemed to them
that the happiness is so close, but the fiasco
turned out.
Conditions which were laid down by Vladimir
Putin for privatization of minority packages of
public industries, frightened off many
representatives of the Western financial world.
Actually Putin put the ideal filter which doesn’t
allow the western speculative capital to
privatization.
The president insists that the structure which is
in the Russian legal framework can only be the
buyer of minority packages and it is the major
aspect. The noisy, but badly understanding law
inhabitants of social networks already branded
this condition, having declared it the cheap PR
course, after all stirs nothing foreign or even the
offshore company to found the Russian open
company and to participate in privatization at
formal observance of all conditions.
Yes, it so, but here foreign speculators well
understand a problem: if shares are taken by
the Russian company in the Russian legal
framework, and all subsequent conflicts to the
state or potential expropriation will decide in the
Russian legal framework and with the Russian
open company as the participant of judicial
proceedings. Repetition of a situation with
“Yukos” which actions belonged to the offshore
foreign companies is already impossible.
It turns out that in this situation only those
foreign investors who aren’t afraid of the
Russian courts will participate in privatization
and aren’t afraid to play in everything by rules
of the Russian state. Those who wanted to
hapnut an asset on cheap stuff to sell and run
away, are eliminated, washing bitter with tears
pages of “Bloomberg”, “Sheets” and “Gazeta.ru”.
It would seem, foreigners have to whine with
envy in relation to the Russian oligarchs, after all
each Internet patriotic knows that a new round
of privatization — this plunder of the country.
However foreign journalists and financiers are
able to work with the calculator and are able to
penetrate into details.
In fact, it turned out so: that thought the
government as sale of assets at any price,
turned in peculiar “coercion to investments” for
those oligarchs who want to work in Russia. The
source of Reuters agency which, according to
the statement of agency, “is close to
privatization process”, claims that oligarchs
minority equity stakes at the price above market
will force to redeem, and operation is performed
within the program for return of the oligarchical
capitals To Russia.
Control of the companies remains in hands of
the state what Putin accurately declared. On the
sum of factors it turns out that oligarchs money
in the budget forces to pour right now, and also
to invest in those companies, whose minority
shareholders they will become. In an exchange
they receive hope that when national economy
considerably will grow, they will be able to count
on certain dividends or on opportunity to sell
the package at higher price. This scheme has
one more positive side effect. It will connect
interests of business elite with health of the
Russian economy and the state enterprises that
can’t but please.
It is good that we have a president – the judoist
wizard who uses even the most dangerous
proposals of our liberals to improve a situation
in the country. And that the essence of some
actions should be read in comments of foreign
mass media while the state and allegedly
patriotic editions are occupied with fascinating
discussion of details of the relations of a goat of
Timur and a tiger of Cupid is bad at us.
Systematically failure information policy can cost
very much to us.

There is an article carried in Sputnik International today, “US debt will reach $30 trillion in a decade”. The article carried this comment :

“”I think it is a terrifying scenario for the United States. It is incredibly unwise to have a situation where you are essentially borrowing simply to pay interest on previous borrowing,” the analyst argued”.

I read this and I couldn’t help thinking, so the “exceptional nation” now finds itself in the same enviable position it has for decades through the IMF and the world bank forced upon developing nations throughout Africa and Latin America and God knows where else (read confessions of an economic hitman and Naomi Kleins shock doctrine), poetic justice indeed. There is such a thing as karma and what goes around will always come around, and now the citizens of the “one indispensable nation” will also know the privations and devastation on their society and economy long experienced by Africans and Latin Americans .

China is the largest foreign holder, with $1.2645 trillion.
Japan is next, at $1.1449 trillion.

Russia holds only about $80 billion.

In conclusion, US can continue living on debt “ad infinitum” because the FED will just print more dollars (in fact is just pressing a few buttons on computer keyboard) and give it to the US Treasury. The Rest of the World using US dollars is actually going to pay for it through inflation.

This article with Saker’s addendum makes my blood boil and gets my Irish up. This is the worst thing to happen to the world since the privatization of sex by marriage; now by money.

This is a life or death issue. Lincoln and JFK found that out when they made money public.

Vineyard Russia lovers can pray, send light, energy and the information of this article to the Russian government, relatives, friends, media and anyone else who can exert influence on Putin and his cronies.

I’ll do my bit with the little wit I have left. What I can’t do, love can. We have received so much “Love From Russia.” Now it’s time to make a new movie called “Love To Russia.”

This morning I watched the sun rising through the trees from my outdoor bed here in 80 degrees S. Cal, after a night of periodically viewing the stars overhead. I thought that if all that lovlectric magnetism could be focused by a vineyard on the move, mountains could be moved.

My early morning rituals include readings of love, including this vineyard Russian version. Allow me to share what a random opening from The Song of Songs translated by Robert Graves revealed. What was arresting was the portrayal of love as an “army in battle array.”

“Bridesmaids: The other women, queens and concubines, have blessed and praised her [love]. They cry: ‘Who is this who advances like the light of dawn, lovely as the moon, clear as the sun, terrible as an army in battle array?’

“Bridegroom: I retired to my garden, to view the fruits of its valley, to see whether the vines were flourishing, whether the pomegranates were budding. [a la Saker Vineyard] There I lost my senses, feeling like a chariot driven by a princess.

“Bridesmen: Return, return, daughter of Shulam that we may gaze on you again!

“Bridegroom: What do you see in this daughter of Shulam, unless it were an army in battle array?”

And from my textbook @ thelovegovernment.com: “When push comes to shove, it’s a matter of love.”

Dennis, you have apparently left the French Ukraine documentary thread, but Lumi and I have both added to it, and I would like you to to check back in there, assuming you have not yet.

You may be pleasantly surprise! But check out the 2 hr 16 minute till 2 hr 45 minute segment of the link I provided. Evidently he did not. I think it might help him understand that what we are up against is not invincible. He’s stuck on his computer altered sunset photos of the WTC towers. Since I have been in one of them (1979) I was slightly unconvinced by his link. See what you think and help him up Jacob’s Ladder if you can. I fear he has fallen off and his rhymes may go to waste.

It was unclear what you were asserting in your posts on the towers. When and how do you assert they were vacated without anyone noticing? That’s as nutty as the idea that they were almost always empty, which I took as the more reasonable of your two possible intended meanings,both of which I consigned to the outer fringes of extremely remote possibility.

Has anyone here concluded anything similar to what you conclude from these photos, videos you keep posting, as though they were proof positive of anything? All I have seen is a couple of other people also questioning their relevancy. Not that votes or consensus establishes truth, but what are you seeing or thinking that others are not???

More clarity, man, more clarity. Otherwise we end up talking about entirely different things! Sorry, can’t spend all day in the vineyard. Maybe better luck next time!

Joy, it’s not the end of the world if Henry Kissinger met with the Kremlin. Henry represents one voice of the CFR and like organizations. He has an opinion. The Kremlin would like to find out his opinion and voice their own concerning various economic and NATO events. If I were Mr. Putin, I welcome an opportunity to convey a message directly to the gang at CFR. Henry has spoken his dislike for the Presidents policies concerning Syria and Turkey. You cannot take much more away from that meeting than a willingness to talk.

Are there friends in foreign affairs? Besides, meeting important people is the only rational and wise thing. Russia is trying to break the unity of the West and work with those factions it can. Many argue that the Kremlin has had various deals with the Obama White House, ex-State Department, regarding Syria. If so, this is a serious accomplishment, not something that “says it all”.

This seems a bit garbled. Economics always has that effect on me, I have to confess. But this does seem confused.

All the evidence from the many victims of the IMF is that the conclusion is correct. Russia should not be privatizing assets to finance the government’s deficit. (At least, any privatization would have to be strictly regulated.)

But nor should Russia be monetizing the deficit.

The conclusion that it should reject neoliberal (quack) remedies does not rely on heterodox economics. – The drawbacks of the neoliberal version of globalization are a hot topic in mainstream economics (see “The Globalization Paradox” by Dani Rodrik OUP 2011).

I’m a wishy-washy liberal and believer in mainstream economics, sufficiently slow on the uptake that I am only now questioning my faith, But what is a coherent alternative? Glaziev et al. seem to mix a bit of Marxian economics, a bit of old-style Keynesianism, and some central planning. Central planning has been tried and failed (see “Whither Socialism” by Joseph Stiglitz MIT 1996). Old-style Keynesianism relies on a causal link between public spending and economic growth that has not been found to hold in practice. And Marxian economics, I know nothing about, other than that the labour theory of value is generally considered exploded. As I understand it, the advantage of Marxian economics is that it studies explicitly the questions of class and power that mainstream economics discreetly hides from view (for the benefit of those who have and shall be given).

Can anyone recommend a text on Marxian economics and its practical consequences (preferably not technical or mathematical)?

Just briefly on the (apparent) gobbledygook which contributes nothing to the argument against the Washington Consensus: The authors are talking about money and credit in a market setting. It is not clear why they say that credit is a natural monopoly. It is however the case that the provision of credit by the banking system works best with some sort of guarantor, a central clearing house or bankers’ bank or a central bank backed by government. Credit and money are distinct – the two sides of the balance sheet. When the banks extend credit, they create money. For any given institutional set-up, there is a determinate demand for money. Excess supply will merely drive down the price of money i.e. drive up the rate of inflation. If banks extend excessive credit, their clearing house will increase the interest it charges them to reflect the increased default risk. Similarly, the central bank. This will choke off the demand for credit. The more efficiently this system works, the less disruptive will be the economic cycle. This is not altered in essentials by making the central bank the only source of bank credit. If it extends too much credit, there will be an excess supply of money, and inflation will rise. Monetizing the government deficit makes sense if the economy is in a slump (there is a shortfall in money supply relative to demand). It does not make sense if the economy is anywhere near capacity, when monetizing the deficit will create excess money. It will lead to hyperinflation. The authors’ description is surely garbled, and does not as they claim reflect practice in capitalist economies.

There is also a question about the assertion that allowing foreigners to own Russian assets encourages them to speculate against the ruble. This seems odd on the face of it: the investors would not want their ruble income stream devalued by a fall in the ruble exchange rate. They have no motive to speculate against the ruble.

Ewan, you are trapped by the rigidly Aristotelian ideological walls of your own economic assumptions/ideology.

Like I said last time, how the hell do you expect to resist Empire with no internal improvements?

How can you resist Empire as Lincoln did, without placing the interests of your producers above those of your atomized, no vision consumers, who can’t see beyond the trough their pig snouts are stuck in??

Etc, etc, etc.

You say, “There is also a question about the assertion that allowing foreigners to own Russian assets encourages them to speculate against the ruble. This seems odd on the face of it: the investors would not want their ruble income stream devalued by a fall in the ruble exchange rate. They have no motive to speculate against the ruble.”

Tell that to Agents of Empire like George Soros. They would eat you alive if you were in charge of a national economy and of a mind to protect a national economy from their attacks, if you did not quickly shed your ideological blinders that they made for you. Capisce???????????

Soros and many more like him would love to gobble up Russian companies and then sink the country. They would be hedged to win in so many ways that your head would spin. They are playing a different game than you imagine. They are not trying to gain a few billion more dollars by protecting Russia and their new lusted for investments there. They are backed by bigger fish (Rothschilds, Rockefellers, British Monarchy, etc) who are out to crush all opposition to their world domination. That’s their mission. Not to make a few more billion $.

“Internal improvements” – public works – are no doubt a Good Thing. Hitler found them so in the 1930s. (His economists told him it wasn’t sustainable. Just as well what he was running a war economy for – was to fight a war. Otherwise, not a panacea).

I do love the image of Abraham Lincoln resisting the Empire But I think we should leave him be.

I take it you have no coherent economic theory or practice you can refer me to?

As for rubles and foreign investors, I was merely pointing out that what the authors were suggesting does not make sense – that foreign investors will both invest in rubles and at the same time speculate against the ruble. (Perhaps they should have explained that they didn’t mean to refer to economic agents seeking profit, but agents who seek to profit by destroying their own profit…?.) A critique of the Evil Empire should at least make sense.

“Aristotelian?” Yes. Epistemology. The theory of knowledge you are employing. The investigation of how you know what you know, how you distinguish reality from mere appearance, prejudice or belief.

Aristotelianism is full of “logical” ( but not reasonable) syllogisms that are mere mental traps that handicap the mind from ever discovering fundamental principles. You emit many such syllogisms of the form

If A = B and B=C, then A =C that bespeak ideologogical/formal logic programming more than reason.

Example: A “Hitler made internal improvements in Germany
B “His economists told him it wasn’t sustainable
C He was a disaster. (unsaid by you, but he was, I agree)

Ergo Hitler was an idiot (C) because (A) he made unsustainable internal improvements, ignoring his economist advisors(B) .

Mechanically, that might seem to hold, on the surface, with little or no inspection. But there are problems. Guess what Ewan? A and B are both completely wrong (see in the link provided who really paid for the autobahns and munitions factories, and why!…..) and completely miss the point of what really happened. Only C is correct. And “they” are going for it (stop Eurasian cooperation and integration, especially Germany hooking up with Russia, at all costs….) again, so maybe we should get clearer on some things, this time, and not let them? Maybe?

Here’s the story of what really happened, from one insightful point of view, employing a principal of morality, without economic ideology blinders: https://youtu.be/U1Qt6a-vaNM

from the 4 minute 30 second mark to the 45 minute mark should suffice for now, but the whole is worth watching.

Any German visitors will find this documentary liberating in the sense that you will be empowered to shed some of your victor imposed “guilt” (even if you are young) onto Americans, and particularly the British. Though the narrator is an Englishman, I believe.

Also good on Russia, in a general, background way.

“British Royal Family?” Pretty good on them too.Except they are really Germans, who have no problem setting Germany and Russia against each other 2,3,4,5 times.Oligarchs don’t give a damn about nations.

But best against dumb. corrupt Americans. If there is moral and epistemological garbage all over the landscape there will be rats (banksters) governing and exploiting them until the people get tired enough of the rotten arrangements to change themselves, first. I’m an optimist. It can be done, with enough good fights among people of good will looking for a way out of the strategic and civilizational crisis of today.

Just don’t take the side of Roger Taney and his Dred Scott decision against Abraham Lincoln. That’s just ridiculous. And I won’t let either of them “be”. That was just yesterday in historical terms and still very highly relevant.

Ted
Ah! Aristotelian! I do know that a valid syllogism entails (if that is the word) a conclusion that is true only if the premises are true. Luckily, I didn’t pretend to reduce what I was saying to a series of valid and true deductive arguments. Phew!

However, it is worth remembering that you’re more likely to arrive at correct conclusions if you apply rationality rather than irrationality. Aristotelian logic is a step in the right direction.

Since we’re talking logic, my comments about public works and Hitler were more in the nature of a reductio, don’t you know. Public works are not the be-all and end-all. If they were, Hitler would have done wonders. (His economic policies, in fact, could only be justified as an all or nothing preparation for war. If you’re interested in the German economy under the Nazis, Adam Tooze “The Wages of Destruction” Penguin (I think) is a very good history.)

I’m sure you know that “placing the interests of producers above those of consumers” doesn’t really make a lot of sense. If no-one consumes, there’s no point producing.

That the plutocrats of the world are united in defending their interests and collaborate with fascists, that JFK was likely a victim of the Deep State, that the US (and before it the UK) has repeatedly used terrorists for their own ends – none of this is controversial, I think. It may be that Francis Richard Conolly over-eggs it, which is always bad for credibility. (Similarly, with the Royal Family. I suggest some brief study of the history of the British constitution in the last couple of centuries.)

My main grouse with your response, however, is that it does not address what I said.

I said that I agree with the conclusion that Russia should try to extricate itself from the institutions of the international economy that are, in effect, a means for the US to exploit others.

I said that the argument presented in the article for that conclusion appears garbled to me (although I am no economist).

I said that there are orthodox arguments, but that I suspect something more radical is required.

I asked if anyone could refer me to a coherent argument for a more radical theory (and practical blueprint for putting it into practice). Marxian economics appears to be the main contender. An idiot guide would be welcome.

There is no use in simply taking every opportunity to be indignant about the perfidy of the Empire. It serves little purpose.

Sure, if you are interested in remaining comfortably trapped in its matrix of false axioms, I agree, 100% !!!. Logic supplies consistency which is necessary. A system of thought or scientific knowledge cannot contradict itself and be worth anything. However Logic is never sufficient sufficient sufficient to discover or create anything new. Oligarchies don’t want anything new. Ergo, Aristotle was their “philosopher” (read mind controller) for more than a millenia for that precise reason.

Pulling your punches, diluting the truth to propitiate those who you don’t think will be able to handle it loses “credibility”, in my book. Connolly’s video is very well researched and provides an impressive amount of historical film footage but is far kinder to them than those Nazis in Buckingham Palace deserve.

“I’m sure you know that “placing the interests of producers above those of consumers” doesn’t really make a lot of sense. If no-one consumes, there’s no point producing.”

Here we go again, with the blindness due to Aristotelian categories and definitions. How about the radical conception that average households, in the aggregate, might ought to be in both, both, both, both (since I can’t use caps, I will use multiplication for emphasis….control b doesn’t work for me to make bold letters………….) Production & Consumption??? Instead of one (Aristotelian Category A OR two, Aristolelian Category B one household of Both Production and and and Consumption…………..Ummmm???? A nice example of mental Divide & Conquer, btw. Then see what they can consume if their powers and rights to produce are targeted by exterior or interior enemies and significantly damaged. And then ask them, “Which is primary to you, your interest as a Producer, or as a Consumer???” Since their production must collapse if their ability to produce is destroyed, just what do you think they will answer, nearly 100% of the time??

Let me give some thought to your very valid concluding paragraphs and request for a more radical theory. It ain’t Marxism with me. But I have to find a link that will be a good introduction for you that you can sink your teeth into, conceptually, and not just a label that won’t mean anything to you or anyone else, probably. Thanks, Ewan.

Ted,
So when you say, “placing the interests of the producers above those of consumers”, what you mean is placing the interests of the producers/consumers above the interests of the producers/consumers.

Don’t get too hung up on Aristotle. Do give due care and attention to logic. It is every bit as ideological as every other branch of mathematics. Best not draft it into the conspiracy of the plutocrats and thus reject it.

(I’m genuinely intrigued by your animus towards the Royal family. Edward who abdicated was an admirer of Hitler – and apparently possibly a traitor – the rest of the family were not particularly. There were members of the aristocracy who were, particularly Londonderry. But that doesn’t add up to what you seem to think it does.)

Ted
My reading of what you say here about consumers and producers may be less than charitable. I find it hard to follow just what it is you are saying. Are you saying that consumers now are forced or persuaded to consume what producers wish them to? That production would be better determined by the ultimate consumer? That the workers should own the means of production? Through (Marxist) government or anarchism? That American consumers should be the producers of their own consumption goods and opt out of any form of globalization? Autarky? Or that workers of the world should unite? Or… Some clarification would help us stop talking past each other.

Ewan: “Are you saying that consumers now are forced or persuaded to consume what producers wish them to? That production would be better determined by the ultimate consumer? ”

I don’t think that is what Ted is saying.
This point that (I think) Ted makes has often occurred to me just from listening to the nightly news: Why alwasy the premise that producers and consumer are different people/entities? Same goes for “consumers” vs. labor.

I think these are false categories. Sort of like separating the in-breath from the out-breath.
“labor” is also consumers.
Consumers are also producers to one or another extent, depending on what they do for a living.
I believe these terms must be very carefully defined and their use always examined for faulty premises.

Katherine, you are getting the gist off what I am trying to get across on Producer/Consumer discussion with Ewan. Thank you for your input. The language/interpretation/perspective of others may help Ewan and I get somewhere (after considerable effort!….) because, as we both observe, we are almost speaking foreign languages to each other, so far.

Ewan, I wonder if some of the difficulty is that you are English, and I am American? Can’t take the time here to butt heads endlessly on the royal family, but would just observe quickly that the link provided earlier https://youtu.be/U1Qt6a-vaNM of Francis Richard Connolly’s Everything Is a Rich Man’s Trick contains one hell of a lot more damning information on the British (and Wall St!!!) support of the NAZIs than a brief reference to Edward’s abdication and running off with Wallis Simpson, which is where you would like to stop, I have the impression? Or didn’t you watch it?. Connolly sounds English to me, and that inspires me to believe that many in Britain can on one future day ditch their degenerate German rulers, and one day rule themselves.

Here is much shorter but historically broader material on the degenerate family from a different source.https://youtu.be/aSNDb-FsO8A “Who Are the Windsors?”

It would be interesting if Mulga Mumblebrain or some other similarly well informed regular visitor here from a “commonwealth” country would contribute something if they see this, because their words may resonate better with you than mine do.

If you acquire any new insight from this, instead of sloughing it off because it does not fit what you already have in your experience or belief, there is a lot more to cover.

As a preview I would call attention to the fresco by Raphael Di Sanzio “The School of Athens”

which has always been recognized by western elites (good and bad over the last half millenia) as a kind of cultural/historical keystone to western civilization. As you will see on his website, the second presentor (Webster Tarpley) employs it at the top of his website http://www.tarpley.net . More later. Gotta run.

Ted
You weren’t talking about the British establishment, but specifically about the Royal Family, who are of little relevance. Of course, it is well-documented that a significant portion of the British elite were sympathetic to fascism; and a significant portion calculated that they had no quarrel with Hitler and that the Empire was best protected by not getting involved. Similarly, it is well-documented that US corporations were keen on doing business with Germany and many sympathised with the Nazis.

On consumers and producers, you are still left saying that the interests of consumer/producers should be placed above the interests of consumer/producers.

I am still in the dark about your proposed blueprint for a better future, other than that it will involve public works.

Mod,
Thanks for letting Ted’s writing through though. It is important to point out that the current economic modus operandi is not to make profit but to use economics as a form of warfare for domination.
He hits the current situation clearly on its head in pointing out what motivates the big global players and what their objectives are. This is what and where the fight is.

it is nothing to do with economics- it is anglosaxon thievery.
when adam smith wrote did he not forget or deliberately omit the loot of India by the english -that is where the wealth of anglo nation was created.
all talk of economics by anglos is just a fraud to hide the real source of the anglos wealth-loot.
if economics is so right then why did IMF hail money printing by the usa but the money tightening for non anglosaxon nations like greece, latin america-asia and africa?

anon is right. British (Adam Smith) “Free” Trade is word trickery and monetary and other forms of sleight of hand thievery. It ain’t what built the USA, but it’s what has been hollowing it out for 4+ decades.

“Free” to commit genocide in India and force the cultivation of opium there, in place of food crops, creating famines.

“Free” to force that opium down the throats of the Chinese, and sail away with Chinese Silver and gold.

“Free” to capture or buy black Africans by the boatload and sell them into slavery in the Caribbean and the American South.

The greatest disorientation among those who oppose the Empire is in the field of economics.

I don’t have the time for long essays to straighten out the mental spaghetti of the many misconceptions and lay out a perfectly convincing, brief thesis that will convert all the Austrian School adherents here who have been hoodwinked. But I do have the time to point out a few of the glaring absurdities in such fraudulent theories, and wreck the idea that they are for real freedom and development of people and nations.

Also, I can take a minute to point out, with some compassion, that Mr Hudson, in particular (I am no fan of “Reagonomics”, so I’d be a little more careful with PCR….though his stand against neocons and the Empire is much to his credit) has considerably more experience and expertise than Ewan, Back2Freedom and others that mistakenly admire Adam Smith, Hayek, Von Mises, Murray Rothbard, etc.

Not only will privatization result in the outcomes outlined above, despite caveats, it will also result in multiple ‘outsourcing’.

When British Railways wasprivatized, a host of secondary, even tertiary companies arose, with inevitable consequences both for the cost to the consumer (having to pay the increasing overheads in order to ensure profits to multiple entities) , it also resulted in serious issues regarding accountability and transparency.

For example, if an accident happened (much more likely with multiple actor all looking for profit) , tracing the root cause becomes all but impossible, even when the full facts are known.

This is because the operation of the railway was no longer centralized, but ‘balkanized’, with each company passing the buck of responsibility to the next, or invoking ‘commercial sensitivity’ to withhold crucial information, or even declaring bankruptcy to evade liability.

When a single entity is responsible, such as the state, it is much easier to prosecute in the public interest.

Fully agreed.
They did the same (almost) everywhere, in 1994 and since in Germany, from 2002 or what it was on in Poland, since last October they split the Serbian Railways into such small fractions competing with each other.

This all lead and leads to: More unemployment, higher customer prices, more railway lines closed down and back to start. A deadly cycle.

I first heard about the privatization plans for the RZD 3 days ago in a german railways forum. Just when I wanted to write a longer comment about the situation I saw that Saker already is aware of the subject and published his article.

It must be prevented under all circumstances!!!
So called “Privatization” has destroyed all of Eastern Europe since 1989.
What remains are de-industrialized empty lands or “new markets” how the Oligarchs would say.

S thought of you when I found this excellent website a few months ago – seems right up your alley.

This link is to a very comprehensive look at the mass privatization of the Chubais etc years, and how the whole ‘shock therapy’ scam was ‘respectablized’ by what is now more accurately termed the ‘Harvard Mafia.':

They have a budget deficit, and there are no really great options. Cutting spending (ie mostly social and military) is not viable; -and on the contrary they want to spend more to grow economy away from oil. No good way to borrow cheaply. Printing money will cause more inflation which is high already.

So making more opportunities in private sector may do some good, small business and agriculture especially.

Now, Aeroflot and Railways are both making losses lately, maybe that’s why they are talking on privatizing them. But indeed it may be a bad idea. No space for several competing airlines; and railways too big and unique. Indeed, privatizing here may drive up prices and reduce safety and quality. Hope they can find ways to keep it–though that means absorbing losses.

You are much more educated in economics than you suggest. Your entire post is very sharp. I agree with you completely.

Most people here have great intentions and have their heart in the right place but have not understand economics and unfortunately supports policies that are detrimental to the Russian interests.

Luckily for them, Putin is smarter than them. Most old russians despise free markets and have a heart for socialism where nobody has more stuff than they do. But they will die, and we need to teach the youth to embrace freedom – social and economic.

Caveat: I am not an economist (like most here!!).
But anyhow.
1. I believe Stiglitz’s thinking has evolved massively since 1996. Not sure how this would be relevant to Hudson’s arguments, but I should think Stiglitz’s change of direction would have some relevance, since I think he is a macroeconomist

2. Regarding “central planning,” I can’t help wondering whether we don’t take far too narrow a view of what this can be. WE shouldn’t assume knee-jerk fashion that “central planning” is a repeat of every mistake putatively or truly lmade by the Soviets. What do you call it when teh government makes major investments in infrastructure and basic research to support new economic sectors and also public services? What is it called when the govt. supports universal free tertiary education for the whole population, and free specialized education for those who have the qualifications to succeed? What do you call it when the govt analyzes the strengths and weaknesses of its economic context (geography, environmental weaknesses such as flooding; transportation obstacles such as mountain ranges; deep knowledge of certain types of technologies; etc.) and takes steps to overcome problems and maximize advantages? What is it called if the government sponsors various types of events to “advertise its wares” and broaden markets? All of these could be called “central planning.”

As for private management being ipso facto more “efficient” than public ownership/management, that is definitely not proven fact. In fact, efficiency often falls when public entities and services are privatzied, for a number of reasons. Some of them are veiled by means of higher prices chareged for the same services–I think this is called socialize costs, privatize profits (as Hudson points out with the example of Chicago). But another big area where privatization costs society is that the employees of public entities work harder and often work longer, and give far more of themselves than the corporate bounders and bean counters do, nor even than the bean counters ever manage to count. Many of employees of public entities work many hours for free, out of commitment to their organiazations and their clients. I am not advocating that people should work some hours for nothing. I am commenting on the level of commitment that people feel and their attitude when they feel that they are working for something that benefits society as well as themselves (because they have a paycheck), often not quantified (but was quantified in a recent UK study).

The cost of this reduced commitment on the part of management and employees is borne by society at large. It is time to stop making assumptions about “faceless bureacrqcies.” I have heard many people here in teh USA assert, and I can confirm this myself, that the service you will get out of Social Security Administration and Medicare and their employees is far better than what you will get out of a private health care entity.

So, who is to say that retaining control of large economic entities can’ty work in Russia? They have a pretty good military, which I assume is “centrally planned” . . .

Caveat: I am not an economist (like most here!!).
But anyhow.
1. I believe Stiglitz’s thinking has evolved massively since 1996. Not sure how this would be relevant to Hudson’s arguments, but I should think Stiglitz’s change of direction would have some relevance, since I think he is a macroeconomist

2. Regarding “central planning,” I can’t help wondering whether we don’t take far too narrow a view of what this can be. WE shouldn’t assume knee-jerk fashion that “central planning” is a repeat of every mistake putatively or truly lmade by the Soviets. What do you call it when teh government makes major investments in infrastructure and basic research to support new economic sectors and also public services? What is it called when the govt. supports universal free tertiary education for the whole population, and free specialized education for those who have the qualifications to succeed? What do you call it when the govt analyzes the strengths and weaknesses of its economic context (geography, environmental weaknesses such as flooding; transportation obstacles such as mountain ranges; deep knowledge of certain types of technologies; etc.) and takes steps to overcome problems and maximize advantages? What is it called if the government sponsors various types of events to “advertise its wares” and broaden markets? All of these could be called “central planning.”

As for private management being ipso facto more “efficient” than public ownership/management, that is definitely not proven fact. In fact, efficiency often falls when public entities and services are privatzied, for a number of reasons. Some of them are veiled by means of higher prices chareged for the same services–I think this is called socialize costs, privatize profits (as Hudson points out with the example of Chicago). But another big area where privatization costs society is that the employees of public entities work harder and often work longer, and give far more of themselves than the corporate bounders and bean counters do, nor even than the bean counters ever manage to count. Many of employees of public entities work many hours for free, out of commitment to their organiazations and their clients. I am not advocating that people should work some hours for nothing. I am commenting on the level of commitment that people feel and their attitude when they feel that they are working for something that benefits society as well as themselves (because they have a paycheck), often not quantified (but was quantified in a recent UK study).

The cost of this reduced commitment on the part of management and employees is borne by society at large. It is time to stop making assumptions about “faceless bureacrqcies.” I have heard many people here in teh USA assert, and I can confirm this myself, that the service you will get out of Social Security Administration and Medicare and their employees is far better than what you will get out of a private health care entity.

So, who is to say that retaining control of large economic entities can’ty work in Russia? They have a pretty good military, which I assume is “centrally planned” . . .

Katherine
I think I more or less agree with what you say. It’s more or less a mixed economy i.e. a mix of public sector and private. I have this notion that what has gone wrong is a comprehensive example of “regulatory capture”, where the corporations have captured the government that is meant to regulate them. I suspect, however, that it is more fundamental – that some form of socialism is the only way to avert disaster. I simply can’t see how to get from here to there. And I’m not at all clear what “there” means in practice.

hi Ewen
know the muddled feelings (and yet still want to have “the answer`)`; here are some I found useful at least to get the questions aligned:
1)Michael Hudson (above) has some great stuff re Marx and current governments deficit strategies etc so go there plus all in all great non BS economic writing
2) in a few days great online course (MOOC) Money Masters over 4 weeks starts (feb 14?) what is money, credit, great presentations; references, fun assignments and last 2 had about 350 participants from around the world trying to sort out the same Q (&A) we are-Jem Bendall
3) oldie but maybe most germane to different thought?philosophy western and whatever Russia is, written about role of money/usury through history by grandson of 2 US Presidents, Adams; The Law of Civilization and Decay“ rise of money powers throughout civilization and takedown there-off
4) Astle; Babylonian Woe classic
and
5) friend of mine but still Dr O Haydorn; `Social Credit Economics“ which I think was at least summarized into russian and distributed to some top aides etc
don`t have link handy to MOOC but go to Positive Money and they will have link
God bless us ALL
Brian

Brian
Thank you for the references. All sound fascinating. The Law of Civilization and Decay – a grand theme that many recent scholars have also studied. Babylonian Woe – ancient banking sounds worth pursuing (less sure on the notion that there has been a four thousand year conspiracy of bankers). Social Credit Economics I know absolutely nothing about despite the fact that it appears to address precisely the questions I was asking – and the book is readily available this side of the Atlantic.
Thanks.

Ewan, I suggest you get any Michael Hudson book instead. Also I think you’l find him and possibly Modern Monetary Theory lectures on Youtube.

Deficits– reasonable ones– are not bad. When a company borrows money to expand you realize that that is Investment. If ever the US treasury begins issuing our currency and credit again, without going thru the Fed, they will not be paying interest when they expand the money supply. Reasonable deficits for productive investment (not for fatcat speculation as now) is fine & necessary.

Modern Monetary Theory is the alternative to the present scam. It borrows from many schools of economic thought including Marx.

It turned out to be not useful (other than for neoclassicals) and he admitted so much later. And Keynes regretted not rejecting parts of the Walrasian analysis on these questions in General Theory that allowed to neoclassicals to piggy back on and subvert Keynesian macroeconomic policy.

But your assertions on ‘monetising deficits’ etc are standard IS-LM objections to public spending. Maybe it’s QToM. I don’t know where you’re coming from. But the sheer number of currency units in the system at any given time have no effect on the ‘value’ of a currency unit.

You have to get a stock/flow consistent view of it all. Spending, not stock, is what can create inflation. Whether government spending or private.

In any case, we don’t live in gold standard conditions any more. There is no valid reason to pay any attention to the New Keynesians or neoliberals.

John G.
The link between money and inflation follows from a stable enough demand for money in a given set of institutional arrangements. A change in banking practices is going to change the demand for money. I’ve a feeling that a drastic change in the way the economy behaves is also going to change the demand for money (people might switch to cowrie shells or cigarettes). There appears to be a relatively stable demand for money in all economies that have been studied, punctuated by gradual or abrupt changes for reasons such as those I’ve mentioned.

I don’t know what you mean when you say that fiscal deficits are merely numbers on a spreadsheet. If the government spends more than it takes in taxes, it meets the shortfall by borrowing, either from domestic savers or foreign. When it borrows, it undertakes to repay with interest. If it raises taxes to repay, the private sector will have less to save from (and there is evidence that higher government spending is associated with lower growth, although I suspect you’ll dispute this). If it persists, its tax take will dwindle. If it borrows from the central bank or the banking system to repay, money is created. If it persists, there is going to be an excess supply of money relative to demand. Economic agents will find that they have more money balances than they wish and will spend the money. The economy as a whole cannot reduce its money balances by shuffling them around. Excess supply leads to a fall in price (does it not?) If the government persists, lenders are going to demand a higher interest rate to protect their real return. If the government persists, lenders are going to look for safer investments.

I’m not sure how the technology used for the accounting of these stocks and flows affects the logic.

As I have said, I’m no economist. Economics gives me brain fog. However, I find the story I have told more credible that the others mentioned here. What is wrong with it and what is your alternative?

” If the government spends more than it takes in taxes, it meets the shortfall by borrowing, either from domestic savers or foreign.”

No. Currency issuers in a modern monetary do not. They spend the money then they issue securities in the amount of the deficit to soak up the excess reserves created by their net spending.

It is merely a portfolio rearrangement of government ‘liabilities’. If they didn’t issue the securities the liabilities would just remain as excess reserves. That they issue these securities is moot in this day and age. It’s a hangover from gold standard days.

“They spend the money, then issue securities to soak up the excess reserves…”

The government buys goods and services from the private sector. It pays for them (I think you are saying) with cash – the private sector has fewer goods and services and more cash. The government issues bonds which the private sector buys (I think you are saying) – the private sector has less cash and more government bonds. So, the government has acquired goods and services. The private sector has acquired government bonds (IOUs from the government). In other words, the government has met the shortfall by borrowing either from domestic savers or foreign.

The crucial detail is the price at which domestic and foreign savers are willing to buy the government’s bonds i.e. the terms of the government’s IOUs). The demand for government bonds is not perfectly elastic.

That government spending may lead to slower growth is a “mathematical impossibility” …

How do you think growth comes about? Neither government spending nor private is wholly on current consumption. All that is required for my (debatable) assertion to be true is that the government is less efficient in its investments than the private sector.

“It is a spending issue, not a stock issue…”

There is a stock of money the private sector wishes to hold in its portfolio (if the money is a buffer stock, there is a preferred range for the stock it wishes to hold). Excess supply of money will prompt the private sector to try to reduce its holdings back to the preferred level, by buying assets and buying goods and services. Individual economic agents can reduce their holdings of money only by increasing someone else’s. Ultimately, the attempt at the aggregate level merely leads to an increase in prices.

Our toy economy has two economic agents, A and B. 20 units of spending power is shared equally between them. A spends his 10 units. Those 10 units become B’s income. B spends his 10 units. They become A’s income. Total income at the start, 20 units; at the end, 20 units. Growth? Zero.

Individual economic agents can reduce their money holdings how?

By “paying down debt”.

You pay down debt by paying the creditor the money you owe. You have 10 units. You owe the creditor 10 units. You pay the creditor the 10 units. How many units are there? 10.

“Our toy economy has two economic agents, A and B. 20 units of spending power is shared equally between them. A spends his 10 units. Those 10 units become B’s income. B spends his 10 units. They become A’s income. Total income at the start, 20 units; at the end, 20 units. Growth? Zero.”

Spending/income is a flow. A spends $10 with B who spends the $10 with C. Spending = $20.

“You pay down debt by paying the creditor the money you owe. You have 10 units. You owe the creditor 10 units. You pay the creditor the 10 units. How many units are there? 10.”

John G.
On my comment at 9.12 am: I think my first sentence is beside the point, at best. What you say is true, and shows that what I said is simply wrong.

However, the point I did not manage to make is this: in a booming economy (which tends to be when banks end up extending too much credit), why would economic agents on average choose to pay down debt, rather than spend, or invest in the expectation of a return higher than the cost of borrowing? The crucial point there is that those who borrow to consume extrapolate the banks’ current willingness to lend, and those who invest expect a return higher than the cost of borrowing, so economic agents on average keep borrowing and spending, and the money they spend is spent etc. The illusion is created that the risk is slight relative to the rewards. In principle, we and the monetary authorities ought to know better and ought to be able to keep things on an even keel (which we do for long spells). In practice, we fall for the illusion again and again. The consequence is an episode of inflation followed by recession (if the monetary authorities try to reduce the inflation). There is always going to be volatility in the business cycle. Historically, the monetary authorities have exacerbated the volatility. In principle, it ought to be possible to reduce its monetary component.

The moderators are politely begging us to stop now. I’ll let you finish up, if you wish.

I must say, that having in my youth read a lot of Rothbard, I am rather inclined to say that all things being equal decentralized and free markets(Is there really such a thing?) are better than central planning. The problem is that the so called privatizations are in fact an occult form of centralization. Sorry, Cass, but I am not experiencing even a hint of cognitive dissonance.

“The problem is that the so called privatizations are in fact an occult form of centralization.”

Wow. that seems like a pretty good way to put things.
I guess what you mean is that privatizing *concentrates* economic power in the hands of people who coordinate their activities behind teh scenes, in secret ways, and their activities are not in the pubilc interest. but they form a secret bloc.

Really, how could *privatization* be in the *public* interest?
Is that too basic to even be a valid question?
Katherine

still pujtin goes on doing business as usual with those entities of anglosaxon cabal who have shown maximum evidence of their hostility to the very existence of Russia, let alone other antions.
russians never learn that is why they are doomed to be attacked and dly one estroyed so many times. her.
russia has only one main enemy england agasint which russia has not prepared anything neither militarily nor diplomatically or by media expsoure of that evil nation.
result is england being under no retaliatary threat of any kind- goes on plotting one after another scheme to kill russians and destroy russia by destablising those pro russian forces whim russian could have benefitted from.
but foolish russia even criticisesd her ally like north korea for acts for which russia should congratulate

P.C.Roberts and Michael Hudson are currently the world leading economists that everybody who claims to have something to do with economics should read and follow. The mainstrean wańnabe economists are just clowns with a task make smoke screens around this discipline and obscure what should be made clear. They often do not understand what they are saying. However in return they are awarded by Nobel prize for economics with is absolutely preposterous.
These two gentleman(Roberts, Hudson) should acctually be hired by the Russian goverment to help implement the truly needed banking and financial reforms .

Well written, but central banks, and the national money supplies they control, are not controlled by their respective governments. The Federal Reserve, for example, is a private consortium of banks. This has been pointed out by a number of writers over the years. The Fed itself has also stated this in rejection of Freedom of Information requests.

Members of the Fed Board of Governors are ostensibly appointed by the President. However, the actual names will be supplied by the President’s economic advisers who are themselves chosen from Goldman-Sachs and other Wall street banks.

Paul Craig Roberts & Michael Hudson are far behind the curve as far as Russia is concerned. As if Team Putin wouldn’t know these very basic and well understood points they make in this article.

But if fighting the Global Dollar Hegemony would be so easy, as Roberts & Hudson naively seem to assume, how come Italy, France, Belgium, Germany, Norway, Canada, Mexico, South-Korea, Japan, Holland, Switzerland, Spain, France, Brazil, the US – do i need to go on? – how come basically all nation states have completely lost their sovereignty since the founding of the FED?

Kicking out all Atlantists is as ridiculous a suggestion as nuking this or that country. Successfully resisting the Global Banking Mafia is a feat so far no nation state has managed. On the contrary, almost all nation states haven been utterly defeated, most even without realizing it, for heaven’s sake!

Russia, Iran and China are the last countries standing, partially. China with Xi Jinping seems going about their business quite confidently.

And as far Russia and Team Putin is concerned, it is my hope they will continue to come up with far more surprising, sophisticated, artful, masterly moves than the hopelessly simplistic wooden hammer methods Roberts & Hudson are suggesting.

Actually, one nation state which did this for many years was the Soviet Union itself. Integration into the international financial system and assumption of foreign debt will inevitably result in such loss of sovereignty as you describe. Some steps have been made to undo the damage created since the early nineties but undoing more of the policies and institutions adopted since that time are need to reach financial independence.

Indeed, these simple methods by which the global banking mafia is controlling many nations have been well explained and exposed for almost a decade by now, on the internet. There are many videos on youtube, there are many pdf versions of famous books. If V. Putin has the smallest interest to find out the “magic” behind money creation, he can do it in a few days.

Kennedy tried to have US government printing his own “federal notes”, through the executive order EO-1110 (or something like that). He was killed soon after that and the first thing that Lynden Johnson cancelled was exactly that order. Maybe Putin is afraid for his life because he knows there are still traitors even next to his office ? So, maybe he will never challenge the global banking mafia.

The only person that I know of, who exposed this global mafia and their methods, and who came with a plan to get rid of it was general Konstantin Petrov. He was probably the Real Deal for Russia and the rest of the world. But he never got a chance to join the circles of power, his political movement got marginalized and Putin somehow ignored him. He died in 2009, unfortunately.

Kennedy also planned to poke around in the black bag of the Shadow Government, the Exchange Stabilization Fund. The ESF deals in endless supplies of global currencies with no oversight, including bonds, gold swaps, and stuff. Few pilgrims survive these Happy Hunting Grounds.

If Russia & China together leave the IMF they will take all of South America w them– w the exception of two countries. Plus Iran, some of the Asian countries. No isolation or trade sanctions would really work. The US/UK/EU & some chaotic Middle East countries couldn’t do anything about it, except all-out war. They cd all float their currencies, and issue moderate investment credits for development.

Rus, China, et al could leave the WTO, too & let nations choose to protect whatever industries are important to them & make bilateral trade agreements.
After they’re sovereign then we have to make them democratic again.

But it’s all a pipe dream because China doesn’t want it, and as far as I can tell, neither does Russia. I hope that all of Putin’s statements are just protective coloration.

I am not sure that there IS a powerful 5th column. If so, then how did Putin get a nearly unanimous vote on Crimea, and when he was supposedly defying the west by starting military action in Syria?

Well, I don’t have any of the answers, but I don’t think it will get any less difficult.

Not only will privatization result in the outcomes outlined above, despite caveats, it will also result in multiple ‘outsourcing’.

When British Railways wasprivatized, a host of secondary, even tertiary companies arose, with inevitable consequences both for the cost to the consumer (having to pay the increasing overheads in order to ensure profits to multiple entities) , it also resulted in serious issues regarding accountability and transparency.

For example, if an accident happened (much more likely with multiple actor all looking for profit) , tracing the root cause becomes all but impossible, even when the full facts are known.

This is because the operation of the railway was no longer centralized, but ‘balkanized’, with each company passing the buck of responsibility to the next, or invoking ‘commercial sensitivity’ to withhold crucial information, or even declaring bankruptcy to evade liability.

When a single entity is responsible, such as the state, it is much easier to prosecute in the public interest.

Russia CANNOT monetize government debt, unless it wants to become Zimbabwe. This mambo-jumbo about private vs public credit creation intentionaly distracts the attention from the simple and most important fact: you are saying is – when you don’t have money – JUST PRINT IT! The Central Bank can’t do that, Mr Saker, they cannot INCREASE QUANTITY OF MONEY in times of sharp inflation, without committing suicide. Even in good times, when currency is appreciating, printing money is outright THEFT, because it confiscates purchasing power from the holders of the currency, and nobody holds russian currency other than russians. You can make comparisons to USA only if you make the rubble a world reserve currency. Then the amount you print is a tiny amount of the total currency in circulation and inflation is really small (1), but more importantly there are more dollars OUTSIDE United States, than internally, so when you STEAL purchasing power, you actually steal from foreigners (2).

Yes, several are possible, but that’s not what I intended to place attention on. Gold and Silver were both concurrent world reserves for the longest time, some countries using one, some the other, and some both. The point is, if you print a trillion rubles when you have 5 trillion in circulation, you increased the money supply by 20%. The Federal Reserve in comparison can print a trillion USD in a single year, and since there is more than 20 trillion hard USD money in the world, the money supply will increase less than 5% – an inflation that is easy to tolerate by the plebs.

Eimar
You know, I think introducing psychology is what neo-classical economists did when they moved away from the classical economics of Ricardo, Mill, Marx et al. But that’s getting into the history of economic theory, where I’m definitely well qualified not to go.

As for your question, I wish I knew. That’s why I’ve been asking what coherent and practical alternatives to mainstream economics people can recommend.

This type of privatization was also used in most of the Eastern European countries for the last 20 years as a method to destroy national economies. They achieve several goals:
– they extract profits from local population through all kind of schemes (like the renting one explained here),
– they eliminate possible competition by deliberately collapsing certain businesses or factories (selling them by pieces or simply demolishing)
– they impoverish the countries so much, that eventually these countries will be forced to sell raw materials (oil, wood, minerals, iron ore, even mineral water …) at ridiculous prices, instead of selling high-value fabricated goods
– they create from those eastern countries a permanent source of human resources to do most of the low level and unqualified jobs in the western countries (sometimes poorly paid and in humiliating conditions)
– by secretly encouraging corruption they create a vicious circle of economic failures from which those countries cannot escape for decades

Russia is seen by some people as the last hope for a different world of economic systems. The scam of creating money/debt “out of thin air” must be exposed, if possible, by even Vladimir Putin in person. Government organised propaganda and teaching materials about this scam for the masses, should be initiated as soon as possible. V. Putin should encourage a system of currency swap as the norm of trading between two countries.
The Bank of International Settlements from Basel needs to be exposed in broad light.

Why many heads of National Central Banks stay in power for almost decades in some countries should also be explained to the masses. They might understand who has the real power in destroying the economy of a country.

Excellent article,and excellent commentary on it by Saker. I hope it will have an impact in Russia. But I get discouraged when I see things like this. Its obvious that Putin hasn’t decided (if he ever even intended to) to break the Western economic grip on Russia. Why he hasn’t I don’t know. Does he not feel strong enough to? And with 85% to 90% popular support. And control of the security and military forces.Just how much stronger does he need to feel to do it? Then there is the theory that he actually believes himself in the neo-liberal economic model. And in which case doesn’t believe in doing more than “tinker” with it once and a while? If that is true. Then the Russian people are in for some harder times. And they may have to consider replacing the current leadership with one that does “really” want change. Restoring Russia’s military influence. And being good at projecting Russian diplomatic influence Worldwide.Quickly fades in peoples thinking if you stand around and do nothing while the country economically fails. The last years of the USSR should have been all the warning needed about that. But maybe it wasn’t.

Maybe Putin and his allies have to compensate the oligarchs for all the losses they have suffered due to the Kremlin’s Ukrainian policies. Perhaps something was required to keep them on board. And privatization would be the obvious thing to offer them.

Of course, this would be going the wrong way, but that is part of having a consensus government. Didn’t Putin talk about taxing some of the ill-gotten gains from the earlier privatizations? That never went anywhere. They would try to organize a coup or collapse the economy and then organize a coup.

Finally, maybe Putin isn’t a neoliberal or a national development type. Maybe he is just a pragmatist from a political point of view.

For the ones who are interested to find out more, I will name a few more key names and books. No offence, but what Paul Craig and Michael Hudson “revealed and advised” are just “peanuts” for amateurs.

Here is just a small example of real stuff (about 1% from what I studied over the past 10 years): “The creature from Jekyll Island”, “The shock doctrine”, “Confessions of an economic hitman”, Konstantin Petrov, Eustace Mullins, Anthony Sutton, John Perkins

If Putin does nothing to change the financial system of Russia, he is most likely working for the global banking gang, despite so many other actions that might look as if he fights against them.
Or, he is simply afraid to die like Kennedy.

Well, probably VVP works for the global banking gang. Not a long time ago he said he had no problem with the question some people becoming rich. That must be opposed to nationalisation.

Do we really know who he is?

Russia may have a good foreign policy but sometimes react to slowly, and says things like “our partners” even when everybody understands that those so called partners are not partners anymore.

I really have a mixed feeling about Russia and China. They are both capitalist countries and the oligarchs inside the system want to get richer. Capitalists from various countries are always fighting each other, more or less, and that has previously ended in two world wars.

VVS succeded Yeltsin, who always was so drunk that he didn’t understand who Putin was? Or….?

I hope Putin learned the hard way, the situation for ordinary russians, when he as a young boy was fighting in the streets of Leningrad, and therefore will not betray his people (even if that will risk his life). But I am not sure. Are You?

Please tell me why he will not betray the people, including nonrussians like me?

He must fight neoliberalism and I haven’t seen any sign of that. Have You?

4/27/15 On Monday, Russia’s Security Council proposed to develop the financial market in order to expand the use of the Russian ruble for international payments and reduce the use of foreign currency in the country.
The Security Council suggested that the Central Bank of Russia and the Russian government should develop measures to improve liquidity and capitalization of the banking system and measures to ensure.

11/2/15 http://johnhelmer.net/?p=14441#more-14441/
“Through the collapse of the international commodity trade and the cutoff of their international financing, the indebtedness of the oligarchs has resulted in their virtual nationalization by the Russian state banks. Individually, oligarchs remain for as long as Putin and the security services judge them to be patriotic and loyal; and on condition they accept their new role as state trustees rather than entrepreneurial capitalists.”

There will never be a perfect time for Russia to break out of the control of the IMF/Fed system by, in effect, nationalizing her own Central Bank and ruble. If she does it together w S. America, Iran & whatever Asian countries will go w her, we would have an end to the global oligarchy’s control of monetary and economic policy. If the group also steps out of WTO and the other supranational trade institutions, nations could complete their restoration of sovereignty.

But Putin has spoken repeatedly of wanting a “free trade” zone from Lisbon to Vladivostok. And even of joining the EU!

An EU-Eurasian Union alliance or a free trade deal from Lisbon to Vladivostok would seriously damage if not destroy the Anglo-American Empire’s influence in Europe and a large part of Asia. Russia’s choices are not perfect, so, if the choice is the US controlling Europe through the TTIP or an EU-EurU deal, which is better?

Paul II, When nations join in supranational institutions, the vote of their citizens can not even theoretically reach the decision-makers. Greece together w all of Southern Europe has been impoverished by forming EU. Free trade unions or zones always kill the industries of the less-developed because without protection they cannot compete. It is the same argument that Britain used against colonial America to try to keep her a supplier of raw materials who wd then buy expensive British finished goods.

Your suggestion is like suggesting that one way to poverty & subjection is better than another. The only way to productivity and freedom is to break the monetary and trade control system by leaving it. The basis for personal sovereignty is a sovereign nation-state.

Privatization is a theft, and as a crime should be punished. Stolen property must be returned to its legal and only owner — the Russian people. Natural resources and strategic industries must always be in the property of the people, the state. Westerners are dumb people who have been brainwashed into supporting their own serfdom by allowing oligarchs to own practically everything, for not only do they pay more (in the terms of price of goods and services) than they do when the people are the owners, but they are also slitting their own throat because oligarchs now have enough power to buy politicians, and thus they end up practically owning the whole socio-political-economic system, the whole society that is. You end up in fascism, in other words, for fascism is by definition the merger of state and big businesses. Natural monopolies like transportation, post office, broadcasting and media companies, roads, tel/mobile companies, etc. must always be owned by the people. That way the people have guaranteed the lowest possible prices on those goods and services as well as safeness and protection from the oligarchic aristocracy which is always working on our enslavement. Dumb Anglos cannot understand that simple facts. Those idiots would rather keep sucking their oligarchs’ brainwashing propaganda programs, than to be free from their paws and live a dignified life worthy of human technological and scientific achievements of this age. They prefer indoctrination willingly.

With that said, here are some very exceptional thoughts of Michael Hudson:

I should point out that there’s often a misinterpretation of the context in which the labor theory of value was formulated and refined. The reason why Marx and the other classical economists – William Petty, Smith, Mill and the others – talked about the labor theory of value was to isolate that part of price that wasn’tvalue. Their purpose was to define economic rent as something that was not value. It was extraneous to production, and was a free lunch – the element of price that is charged to consumers and others that has no basis in labor, no basis in real cost, but is purely a monopoly price or return to privilege. This was mainly a survival of the feudal epoch, above all of the landed aristocracy who were the heirs of the military conquers, and also the financial sector of banking families and theirheirs.

The aim of the labor theory of value was to divide the economy between excessive price gouging and labor. The objective of the classical economists was to bring prices in line with value to prevent a free ride, to prevent monopolies, to prevent an absentee landlord class so as to free society from the legacy of feudalism and the military conquests that carved up Europe’s land a thousand years ago and that still underlies our property relations.

People are unexposed to the concept of economic rent as unearned income. It’s a concept that has been turned on its head by “free market” ideologues who use “rent seeking” mainly to characterize government bureaucrats taxing the private sector to enhance their authority – not free lunchers seeking to untax their unearned income. Or, neoclassical economists define rent as “imperfect competition” (as if their myth of “perfect competition” really existed) stemming from “insufficient knowledge of the market,” patents and so forth.

The word “rent” originally was French, for a government bond (rente). Owners received a regular income every quarter or every year. A lot of bonds used to have coupons, and you would clip off the coupon and collect your interest. It’s passively earned income, that is, income not actually earned by your own labor or enterprise. It’s just a claim that society has to pay, whether you’re a government bond holder or whether you own land,

This concept of income without labor – but simply from privileges that had been made hereditary – was extended to the ideas of monopolies like the East India Company and other trade monopolies. They could produce or buy goods for, let’s say, a dollar a unit, and sell them for whatever the market will bear – say, $4.00. The markup is “empty pricing.” It’s pure price gouging by a natural monopoly, like today’s drug companies.

To prevent such price gouging and to keep economies competitive with low costs of living and doing business, European kept the most important natural monopolies in the public domain: the post office, the BBC and other state broadcasting companies, roads and basic transportation, as well as early national airlines. European governments prevented monopoly rent by providing basic infrastructure services at cost, or even at subsidized prices or freely in the case of roads. The guiding idea is for public infrastructure – which you should think of as a factor of production along with labor and capital – was to lower the cost of living and doing business.

But since Margaret Thatcher led Britain down the road to debt peonage and rent serfdom by privatizing this infrastructure, she and her emulators other countries turned them into tollbooth economies. The resulting economic rent takes the form of a rise in prices to cover interest, stock options, soaring executive salaries and underwriting fees. The economy ends up being turned into a collection of tollbooths instead of factories. So, you can think of rent as the “right” or special legal privilege to erect a tollbooth and say, “You can’t get television over your cable channel unless you pay us, and what we charge you is anything we can get from you.”

This price doesn’t have any relation to what it costs to produce what they sell. Such extortionate pricing is now sponsored by U.S. diplomacy, the World Bank, and what’s called the Washington Consensus forcing governments to privatize the public domain and create such rent-extracting opportunities.

In Mexico, when they told it to be more “efficient” and privatize its telephone monopoly, the government sold it to Carlos Slim, who became one of the richest people in the world by making Mexico’s phones among the highest priced in the world. The government provided an opportunity for price gouging. Similar high-priced privatized phone systems plague the neoliberalized post-Soviet economies. Classical economists viewed this as a kind of theft. The French novelist Balzac wrote about this more clearly than most economists when he said that every family fortune originates in a great theft. He added that this not only was undiscovered, but has come taken for granted so naturally that it just doesn’t matter.

If you look at the Forbes 100 or 500 lists of each nation’s richest people, most made their fortunes through insider dealing to obtain land, mineral rights or monopolies. If you look at American history, early real estate fortunes were made by insiders bribing the British Colonial governors. The railroad barrens bribed Congressmen and other public officials to let them privatize the railroads and rip off the country. Frank Norris’s The Octopus is a great novel about this, and many Hollywood movies describe the kind of real estate and banking rip-offs that made America what it is. The nation’s power elite basically begun as robber barons, as they did in England, France and other countries.

The difference, of course, is that in past centuries this was viewed as corrupt and a crime. Today, neoliberal economists recommend it as the way to raise “productivity” and make countries wealthier, as if it were not the road to neofeudal serfdom.

So you say, although you can hardly be dumb too if you know perfectly well as you state. I will tell you a secret, Anglo. Love and hate are the same things; they are just sitting on the opposite sides of something, and that is all. It is by the grace of your delusional and poor upbringing which haven’t thought you of morality and the proper dealings with your emotions and the sense of self-importance, do you see one thing as good, wanted and permissible, and the other as bad, unwanted, unacceptable and wrong. I will give you a simple example, so you can see how the plain the truth of it is. Lets say you behave in a way that intrudes or transgress into someone’s property or sovereignty. Your behavior will generate the hate of the victim,and you will probably even understand how “justifiable” it is. Or you don’t have to do anything. Some people will simply not like you no matter what you do or don’t do, in the same way some others will like you for the same reason (or lack of evident reason(s)). Like you see, Anglo, hate holds just as natural existence in the nature as love has: they are just different parts of the same thing — an open show of your emotions which have someone’s behavior generated or simply a sign of dislike. The one is not better of the other. Showing love to your enemy is suicidal, not to mention stupid. You see how perfect defensive mechanism that particular emotion is, hm? They, (those 2 emotions) just as those old stupid Western philosophers would say, “are.” Now you have received a lesson in common sense which you should have been given as a child. You don’t have to thank me, Anglo. Just count yourself lucky I was in the mood to show you the wisdom. :)

And you accuse me of racism, I see, hm, Anglo? Well, of course I am racist, Anglo. I love my race, but, mind you, it is not your race. I very much despise your race characterized by the total lack of morality and your propensity for deviant and perverse behavior, especially of sexual nature, and your lack of courage and loyalty too, I must add. It is not by chance that degeneracy stems from your English speaking world, Anglo, and it is not by chance that your oligarchs can rape you as they wish, you being so servile and cowardly. You are dysfunctional, and from that disfunctionality, disease arose. Now you protest why I show my dislike toward your liberal world and you as holders of that world. Tut-tut, Anglo.

You can pretty much trace English Anglo-Zionism to 1694, when the Bank of England was privatized. This bank emitted bank credit as money, creating debt instruments and putting the people in hock. Political Zionism came later with Herzyl, when Rothschild joined.

The parasite jumped from Amsterdam (stock market capital) to London, as part of a centuries long plot.

The message is that Mammon is a God that is very powerful and hard to resist. I will point out that Bolsheveiks, funded by Wall Street Capital, managed to parasite the brain of Slavic Russia.

So, the Russian people are not immune.

It takes a particular kind of institutionalized knowledge to create bulwarks against money power and false economic doctrine.

I recommend a fourth branch of government, which can issue both money and credit into productivity channels. This fourth branch is to issue lawful money that does not take rents and usury for its right to exist. .

I also recommend a Bancor system, so one nation’s money no longer trades for another nations money. All foreign trade is only barter, and a bancor as accounting device marks the trade. Debts and trading moneys always leads to exchange rate problems.

Note carefully, that both Hudson and Roberts describe exchange rate mechanisms that will be Russia’s undoing.

Some of the commentators here are “hard money” types. Hudson and PCR are speaking from the perspective of Modern Money Theory, which explains the actual workings of central bank operations in fiat money regimes (those of the entire world today, except those who peg their currency to the dollar, and the Euro countries, which gave away their sovereignty).

The key distinction is between countries that are sovereign issuers of their currency and those who are not (the Euro countries). All dollars are issued by the US gov’t and their licensed banks. The banks create money by creating loans. Many people seem not to be able to wrap their heads around this, and imagine that “money is created out of nothing” and therefore worthless, or that countries are “in debt” the way private entities are in debt, and therefore have to “balance their books” and even preferably run a surplus, etc. Private entities, county and state governments,the Euro countries, are all currency users and not currency issuers. To get currency to finance their operations they have to issue debt instruments or sell things. There is a fundamental difference between the debt of a currency user and the “debt” of a currency issuer, which is actually merely an accounting debit, since the amount of the debit on the issuer’s books is precisely the amount of money in the private sector, by definition. This is inflationary only when the quantity of dollars exceeds the productive capacity of the private sector (I’m simplifying).

James
I am working my way through the links you have provided. Thank you. I may be back with questions or squawks of dissent.

I don’t think you are quite right about what you call the key distinction. Is it not between those governments who borrow in a foreign currency, those who borrow in the currency of a monetary union they are members of without having full control of its central bank, and those who borrow in their own currency with full control of their central bank.

The last of these can still be in debt to the rest of the world. They can delay default by repaying debt in devalued currency i.e. “printing money”. If they persist, the result is hyperinflation.

James
A couple of the links you provide contain lists of propositions allegedly affirmed by “monetary fundamentalism” and counter-propositions affirmed by “Modern Monetary Theory”.

“Monetary fundamentalism” is intended to be derogatory. It picks out no particular theory in the real world. There is no school of monetary theory that would subscribe to all of the propositions. Indeed, as formulated on the links you provide, I doubt there is any school would subscribe to any of them. What we have is a composite straw man the only thing about which we can determine is that advocates of “Modern Monetary Theory” disapprove of it.

Likewise, the counter-propositions sound dodgy. Keynesians, neo-Keynesians, new Keynesians, and post Keynesians have all had interesting and controversial things to say. By comparison, this seems pie in the sky.

It appears that much of what these economists assert depends on lenders never learning – each time the government decides to borrow, they are happy to lend, at whatever interest rate the government proposes. They have no notion that inflation might accelerate, so they demand no inflation premium to protect their real return.

As I said at the outset, I’m no economist, and my brain cells start to die when I read economic papers. Perhaps I’ve just missed the point. I’ll continue reading (though with dwindling expectations of enlightenment).

“It appears that much of what these economists assert depends on lenders never learning – each time the government decides to borrow, they are happy to lend, at whatever interest rate the government proposes. ”

Bond issues are used to establish the government’s target interest rate across the yield curve. The coupon is set by the issuer.

The market has no power. The government could just establish its desired rate by offering interest on excess reserves and do away with ‘debt’ issues altogether.

The usual state of affairs is monetary policy is used to keep interest rates in the payments system going to zero. Which is the natural rate.

You seem to have everyone on both sides of the balance sheet. It can’t be so.

The government sets the term and coupon and how much it wants to sell. It then either invites the market to bid or it sets a price and waits to see if anyone buys. If no-one buys, it must change its price.

The central bank sets the short-term interest rates at which it is willing to deal with the banking sector. The rest of the term structure is determined in the market, given the short-term rates set by the central bank.

The natural rate of interest (if there is such a thing) would only be zero if there were no growth in the economy i.e. no prospect of a return on investment, and if economic agents were indifferent between consumption now and consumption later.

John G.
You are of course correct. The central bank can indeed influence yields across the curve by its own buying and selling. I was wrong not to mention it. Recall that you said that “the market has no power”, which is something else again. The central bank can influence yields; it can’t control them. What it can control is the short term rates it is willing to deal at in the money market with the commercial banks. It controls the short term rate by borrowing from and lending to the eligible commercial banks (reverse repo and repo). This is the only part of the curve where the central bank has such control over market rates, because of its ability to create and destroy money.

I’m not clear why you say that government spending would cause the commercial banks to have excess reserves, unless the government were to borrow directly from the commercial banks itself, which isn’t the normal way of things.

“I’m not clear why you say that government spending would cause the commercial banks to have excess reserves, unless the government were to borrow directly from the commercial banks itself, which isn’t the normal way of things.”

When the government spends it marks up numbers in the banks’ reserve accounts and the bank marks up the numbers in the payee’s account. The bank has no corresponding liability to the central bank for the reserves that have been issued to its account i.e. excess reserves.

John G.
If the government borrows from the central bank and spends on private sector goods and services, the money is paid to the private sector who themselves spend it or deposit it with a commercial bank. Commercial banks take in deposits and extend credit. In a fractional banking system, they extend credit that is a multiple of the deposits they attract. The reserves they are required to hold are a very small part of their balance sheet. If a bank an excess of the assets designated as acceptable as reserves, it sells them if it can earn a higher return on other assets.

I’m still not clear why you think the “natural” rate of interest in a growing economy is zero..

John G.
The government borrows from the central bank or from the commercial banks or from the private sector. Not misleading, clarifying. (It is a relief that, unlike so many others, you don’t assert that the central bank is a private enterprise for the profit of bankers – usually the Rothschilds. Yes, the central bank is a part of government. It is sometimes helpful to be specific about what the different branches of government do e.g. the Treasury does not manage the military, the Pentagon does.)

When a bank extends credit, the other side is indeed a deposit. When a bank accepts a deposit (for instance when my grandson takes the pocket money he’s saved and opens an account) – ?

Banking regulation stipulates one or all of capital/asset ratio, liquidity ratio, and minimum reserve requirement. The last is the amount the bank must hold in securities the central bank will accept in return for cash in repo transactions etc. Until 2007, for example, mortgage-backed securities rated AAA by the rating agencies were deemed acceptable by many central banks. These are decidedly not “government money”. They are assets used as collateral between the banks and the central bank when borrowing and lending.

Several countries have no reserve requirement.

Whether or not you consider fractional banking a myth, it is nevertheless the case that bank lending is a multiple of bank equity, cash held by the bank, or reserves.

I can only suggest that advocates of Modern Money Theory spend some more time in a bank, a central bank, or the bond and money markets markets.

The example with the sale of public parkings in Chicago was a great move on Saker’s side. Hard to find a better example that so easy gets everybody on your side. That was a horrific ‘deal’ that should be broken in court. I actually don’t mind privatizing the parkings, but that should have been done in a series of auctions, where every property can be bid by different buyers and everyone can bid and the city can collect the market price of the propery, and further more you end up with many owners that will compete with price and provide better and cheaper service than the government did. Instead they sold it to their friends for a fraction of the market price, to a single owner, who can easily exploit monopoly of a good with inelastic demand. Had they sold them the right way, we would certainly be better off than having government run parkings.
However you don’t know the end of that story. The free market is still finding ways to put pressure on those corrupt dastards. Somebody came up with an app, where you ask for parking, and somebody waits for you downtown, and you pay him 15 bucks instead of 35, and they take your car outside of downtown, and find free parking on some street, and ask you when you want it back. The POWER of freedom baby! No government parasite can ever come up with such great idea!
Anonymous, the unpaid bills you were talking about … you got that wrong dude. The unpaid bills is actually an incredibly positive and inspiring story! Huh? Uh-huh! I am telling you dude, you like to sound confident, but you are very vulnerable on economic issues, not because of lack of intelligence, but because your love of socialism is always the losing position in an argument.
The State of IL elected a Republican governor in the last elections – Bruce Rauner. I voted for him, and all my friends, and we are nothing but thrilled with this guy. My property taxes have been going up every year, and that on top of increasing state income tax and state sales tax. It was up to the point of me deciding to leave the state. The whole state is infested with all kinds of parasites – blacks in the south, the most powerful teachers union in the country, and we have the most government clerics per capita in the whole country. Too many people sit inside the cart, and not enough people pull the cart. When Rauner came he said : NO MORE TAXES. We have to now cut. Of course Madigan and the democrats will never cut a single parasite, but Rauner has been standing firm, half a year now, and has refused to approve those outrageous budgets. Those unpaid bills you talk about… you can remove half of those services and nobody would know, except the parasites that were fired.

I am with you on that, but the world is a flawed place. In WWII, there were perhaps only three choices: pro-Germany, pro-USSR, and neutral. There wasn’t a pro-Iceland/Switzerland/Uruguay choice. And this blog seems to be more about the real and ugly world than the ideal world that we would all wish for. As an example, there is no good choice or situation for the Ukraine. Depopulation, destruction, and disease are likely coming. And, sadly, most of the idealists in the Donbass seem to have ended up dead.

A cynic would say the vision of the BRICS/Eurasian Union is that regional elites control things instead of the Western banksters. It doesn’t mean the people get any say. We just hope that they aren’t quite the sick Satanists that we are used to in the West and that we can avoid huge wars.

…
Q— How do you assess the consequences for the economy? Privatization was associated increased efficiency in the management of the property and ultimately the growth of the economy…

A— How do you know if the property stolen and not earned, the owner is unlikely to be its judicious use. Likely to sell at the first opportunity and hide money abroad. This is what happened with most of the manufacturing industries. Privatizers seldom bothered with the development of production. Typical was a different picture: the assignment of working capital, sale of stocks, unpaid wages and dismissal of workers, then dismantling and sale of the equipment loans and the bankruptcy of the enterprise. After that it converted it into a warehouse, trade, import or office space. So if any growth occurred, it was the growth of the economy offshorization, warehouse and retail space. Let’s not forget about the so-called foreign advisers who worked in the state property Committee, who have abused his official position and was involved in the privatization. They acquired Russian assets, using confidential information for personal advantage. On this account, by the way, there is a decision of American justice, which recognized, in particular, guilty of two Harvard advisors chief privatizator fraud. From the beginning, privatization was carried out with the most favorable conditions for foreign capital that had huge advantages due to multiple incomplete cost privatezirovana enterprises. Not accidentally, the chief financial operator in the market of privatisation deals turned out to be one of the American-Swiss banks.

And most importantly, the privatization of the 90s led to enormous chaos in the economy and a sharp decline in industrial production because of the destruction of production chains.

Q— Explain, please.

A— The Soviet economy was formed a large production and scientific production associations. Each of them consisted of serial and experienced factories, design bureaus and design institutes. Such industrial associations was about five thousand in the country. Each of them consisted of from five to a hundred thousand workers, depending on industry.

If privatized, these industrial-technological complexes as a whole, we wouldn’t have gotten a sharp drop in economic efficiency, would still be a workable structure.

And when privatized production plant separately, and separate pilot plant, and design Bureau separately, this has led to a sharp rise in transaction costs, to the destruction of cooperation, and ultimately to the collapse of manufacturing and technological systems and economic collapse of the entire high-tech industry.

That is, the original strategic fallacy of the privatization, which I, incidentally, said before it began, in 1991, was what was not privatized holistic industrial-technological complexes that are capable of independent reproduction, and were privatized legal entities, most of which were productive units and never functioned as a holistic enterprise.
…http://vpk.name/news/149243_beneficiarom_etoi_privatizacii_mogut_stat_spekulyantyi.html

Some facts about USSR economy:
1) Soviet Union was self-sufficient, 2) USSR had minimal trade contacts with the capitalist non-socialist World,
3) Soviet industries and resources were nationalised, 4) Soviet economy run on principles very different to the western capitalist economies. There was central planning, state ownership, full employment, trade protectionist policies.

Today’s Russia is very different to the USSR:
1) Russian economy is a lot smaller,
2) The majority of the soviet state owned enterprises has been privatised and state property of significant value has been plundered by oligarchs,
3) liberal reforms caused bankruptcy of state industries and there was significant
de-industrialisation during the Yeltsin years
4) Russia is more integrated and open to global economy and has joined WTO. Therefore, it is more vulnerable to western blackmail and pressure , 5) Unemployment and poverty are widespread (as opposed to the soviet years)
6) The economic institutions and policies are western inspired

Nevertheless, Russia is still one of the last sovereign powers that still exists in today’s globalised neoliberal economy.
It is not fully integrated into NWO.
State control of economy is more significant as opposed to European countries.
It has a powerful military.

For Russia to resist NWO, a complete reversal of neoliberalism needs to be implemented.

That means:
Exit from WTO/IMF, stopping any further privatisation, nationalization of natural monopolies and of important industries, policies for the promotion of full employment,
more trade protection and elimination of free trade agreements, rebuilding of the industrial and agricultural industries so as to achieve self sufficiency, reintroduction of some aspects of soviet economic policies, agreements with countries that resist NWO etc

‘Let’s hear how you explain China raising 600 million poor into the middle class in a decade or two.’

It is funny that you used the correct time frame during which this happened. That is good, we agree on the facts, that did happen, and it was in the last decade or two.

Now lets look at what happened in China since the communists took over after WW2 until the 1990s. The communist party set an all time record for mass murder in peace years, killing over 100 million of its own population, refusing to acknowledge people have any rights at all, standard of life during the entire time was that of a miserable rat.

Now WHAT happened about two decades ago? The communist party went through a transformation. They opened borders. Cut corporate taxes to a level much lower than United States. Allowed private property. Allowed internet, yes, with filters, but still. Chinese do have some rights now. Today China is totalitarian country, but not communist, and less socialist than United States, when you measure socialism by what % of the national economy does the government consume. Foreign capital flew into the country, and all kinds of factories were created, along with hundreds of millions of jobs, where people could be ‘exploited’ by the west. Yes, the standard of life raised dramatically in China, simultaneously with that of Russia, simultaneously with the DUMPING OF COMMUNISM. You feel the drift.

Good job! But the impression you give is that there are only 2 choices, Communism or Adam Smith, economist for the British East Indies Company, at the time that the British Empire decided to go with the Bank of England and “the company”.

That is a false dichotomy. Not only is there a 3rd way, a 4th way etc, but other ways that have not even evolved yet.

There is no other way, but to reverse neoliberalism and to return to policies reminiscent of 1950s-1960s social-democracy ( or even of soviet socialism ).

What that means is that Russian governments will have to proceed with re-nationalisations of industry/banking/transport/resources, trade protection of local production, significant increase of taxation on multinational corporations and oligarchs, stricter capital controls, monetary reform and nationalisation of the ruble, and a gradual disconnect from the global neoliberal economy.

Otherwise, Russia cannot defend itself from western aggression and sooner or later it will have to surrender not because of any western military aggression but because of the western economic pressure……

As some other readers, I’m sure Russia won’t fall into this trap. Because the stuff that is known by ordinary people who doubt the System and read the Internet is sure known by the Russian president’s advisers. I trust Team Putin to find the best solution for Russia … because I’ve been following him since ~2005, and look at all his great moves.

One comment on privatizations:

Privatizations, apparently dictated from abroad in the wake of the Fall of the Wall, have had no positive effects in Germany (although I think other countries have fared worse than Germany). Among others, privatizations delocalize and anonymize business ownership so the owner doesn’t care for the region and profitability becomes the sole point of interest. They have erected oligopolies, and while I would not say that these have degenerated into cartels, a public monopoly of telecommunications and other utilities would be more efficient and overall cheaper to the citizen because there is no need for anyone to extract profit from the system.

Another comment on the lingo:

Just what is the meaning of the verb monetize as used by the authors? From the context, I inferred that it means to use the (electronic) printing press to create money (out of thin air). Which is plain and clear English and easy to understand for the average layperson. But the verb monetize is not. Because it sends you to the land of economic jargon. Why not use plain and clear English directly so laymen can understand more easily what’s going on?

And one comment on thin air and how it can be exported:

There’s nothing per se wrong with creating money out of thin air. It just needs to be transparent so others know how much is printed. Users of the money will judge the value depending on the printing habits. But there are at least two blatant problems. One is when this power is privatized for profit extraction. And the other is when one exceptional country employs fraudulent and even violent means to force others to accept and gobble up the currency that it prints.

This is why the U.S. experiences only moderate price spikes despite an exorbitant inflation in the amount of money. They inflate their dollars abroad (=> trade deficit => Germany, Japan, China) and thus get a free lunch on the world economy, which they use to pay for their – again – exorbitant military apparatus, which they have used during the past 25 years to destroy countries that wanted to break free from the dollar. By accepting and using the USD the world pays for the US military. It is a simple scheme in essence, but many people don’t understand it or cannot believe it.

Click on MAX. You’ll see a sustained deficit. Currently ~40 billion USD per month. What it means is that, on average, every single person in the USA gets 4 $ freebies per day, which no one in the US needs to work for. What it also means is that the aforementioned surplus runners supply the U.S. with a high standard of living for free. Note that in Germany this absurd surplus is framed as “Germany, the export champion”. And MSM and gov constantly refer to it as a good thing rather than a tribute.

Why do otherwise smart and literate people are so blind on economic issues?

Here are some fore facts about the USSR. Millions of people starved to death. More people died in USSR in ‘peace’ years than Hitler killed in WW2. No technology of any kind outside military. Juguli, Lada and Moskvich and Volga were produced for 30 years without any kind of technological improvement, when the west was just tearing there. Human rights? Ha! Stalin was famous with human rights. Slavery. There were years in the Soviet Union when people were actually slaves, even when slavery was already abolished in US. Russia has never recognized that it enslaved its own population, but it was indeed slavery, BUT the slave ownership was not PRIVATE but STATE. All citizens were slaves, and were property of the party. Here is how it worked: central planning started with a plan for grain production – say 1 million tons. That goal was cascaded down to the regions, then towns, then villages. People with connections in the party arranged that they get a more manageable goal, but not every one was lucky. Some villages had goals of 1000 tons and they could only produce 300. Not producing your goal led to rounding up the people in the village, and SHOOTING a dozen of them for inspiration to the others. Then people in areas with unmanageable goals began to flee. And then slavery began. They couldn’t allow people to just run away, so everybody was given ‘papers’, and nobody was allowed to leave their village without permission from the party. At the end of the year the party would collect all grain and export it to get some money to finance its enormous body, leaving millions of people in starvation. If they catch you that you try to save some grain for yourself, they take you and shoot you in front of everybody. There is a famous story about a little boy who went and told the party secretary that his dad hid a bag of grain in his basement. His dad was shot in front of everybody and the kid was made a national hero and the town took that kid’s name and the party gave his example to everybody.
The life expectancy of males in USSR dropped to about 40 years. Interestingly, the life expectancy of slaves in USA was much higher, slaves in USA never starved, and received regular medical attention simply because they were private property and their owners cared about their stock. Russian population after WW2 continued to decline even while the West experienced its fastest growth in history, with biggest increase in standard of living of average people in history.
These are the facts of the Soviet Union. The entire existence of the USSR was a crime against humanity. Russians today are so lucky to have Putin. I have listened to him and he understands that Russia will NEVER have a rich STATE-RUN economy. There will never be a ‘silicone valley’ in a state-run industry. Russians need freedom, need their ingenuity encouraged and harnessed and channeled into a free market economy. Why can’t russians make computers? Germans and Americans are not smarter! But they are freeer! The State has never invented anything good, and Russian State, even under Putin, will never be a competitive economy in the world, and without competitive economy everything else is doomed, even military.

re: “There will never be a ‘silicone valley’ in a state-run industry. Russians need freedom, need their ingenuity encouraged and harnessed and channeled into a free market economy. Why can’t russians make computers? Germans and Americans are not smarter! But they are freeer!”

The idea that Germans are freer than Russians today is a bit interesting. In any case, the Silicon Valley was a military-industrial complex success story. Plenty of guidance and policy, but let the hungry sharks compete. Kind of like many countries in Asia have used since WWII. Isn’t this what Russia needs?

By the way, I suspect that your screed against the USSR is actually a spoof to make the case for all of its accomplishments. It was brought down by a corrupt elite who wanted to steal everything, which may happen in the West, too. Disaster capitalism coming home to roost. And the fact remains that Western neoliberal freedom and capitalism of the last twenty years or so are enough to make us question this kind of freedom. It is freedom for pirates. On the other hand, Stalin took a nation of plows and left a nation of nukes and a first-rate educational system for the future. Do you really think a free market leader could have lasted a month against the coming Nazi onslaught?

“I agree with your point of view. The Russian state could impose a more effective control and management of public assets rather than privatize a big piece of these assets at very low prices. As I said the state has huge foreign reserves that have appreciated very much due to the ruble devaluation. The government can also borrow to cover the budget deficit. The last year deficit was not so large, and the oil price can revert to a higher level. So there is no need to hasten with privatization. It can be used only in the extreme case, if the oil price remains very low until the next year.
To some extent, the approach of the Russian neo-liberal government reminds me Russian privatizations of the 1990’s like notorious “shares-for-loans” scheme that created the oligarchic rule that Putin abolished when he came to power. Ukraine now is governed by oligarchs. This catastrophic outcome could have been a destiny of Russia. ”

Russian Railways Privatization In A Year Or Foreign Invertors Are Hardly Probable

Feb 6 16

The privatization of Open Joint Stock Company Russian Railways is not probable within a year and foreign investors are not a very likely scenario. Russia’s Transport Minister Maxim Sokolov said on February 6, 2016, “We have not discussed either parameters or approaches, and here we should handle the case with care.” Sokolov adds, that he was not ready to discuss options of selling packets to foreign investors, adding the ministry had not considered this option in full detail yet. Itar-Tass reports.

Russian Railways to Increase Investment in Purchase and Renovation of Electric Trains in 2016

Jan 27 16

Russian Railways announced that it will invest RUB 3 billion in new motorised multiple engine and carriage units In 2016. The company intends to purchase 82 ED4M and ED9E series electric train carriages manufactured by the Demikhovo Machine-Building Plant. In addition to purchasing suburban rolling stock, Russian Railways also conducts an annual overhaul of its commuter fleet. In 2016, the company plans to overhaul 956 cars of suburban railway carriageshttp://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8683834

John G, Russia may NOT issue the rubles or credits that she so desperately needs to invest in the economy, or even to finish the pipelines to China. The IMF/Fed system to which she belongs mandates that all countries labelled “developing” (most of them incl Russia) are limited: They may issue currency only in an amount equal to the value of their exports! Starikov goes into this in his free online book which I mentioned in my last comment. The central banks regulate currency issuance and are NOT under the control of their govts. The ruble makes up only –if I remember correctly– 25% of the circulating currency. Rest is dollars and euros

This is the reason that countries are so avid to export and don’t give first priority to the domestic market, domestic needs. This is why they borrow money to try to develop, instead of issuing the credit to enterprises themselves. They go into debt, with all its risks, to obtain the worthless paper currencies of other countries instead of printing their own or making their own keybord entries to credit a borrower. The IMF/Fed system requires this; they may not even use their foreign currency reserves as collateral.

The emerging global oligarchy is comprised of supranational institutions: The IMF/Fed system, the WTO, the trade agreements like NAFTA, TTIP, and the World Bank, and BIS. Step out of the control of these institutions and our nations are again sovereign. Then we’ve only to regain control over them>

Penelope
I think your first paragraph is simply wrong. No central bank “issues currency only in an amount equal to the value of exports”. I doubt that only a quarter of the currency in circulation in Russia comprises rubles.

That has to do with IMF conditions, The amount of currency can only be equal to their dollar reserves. I think that happened when Russia defaulted and the loans from the IMF had those conditions just like in Argentina. Not following their rules makes you ineligible for loans. But as we see in Ukraine, the rules can be changed when ever they wish.. Also why is all the gold immediately shipped off to NY when ever the US takes control of a countries finances? In every country even before anyone gets appointed the gold is on a plane to NY.. Not like NY is safe, all the gold in the WTC disappeared..

mmiriww
I’ve found an IMF working paper looking at the proposal in the 1930s by the likes of Irving Fisher that bank deposits should be fully backed by reserves, the “Chicago Plan” (which I was unaware of). Reserves would normally be assets stipulated by the central bank. Full reserve banking is a respectable but controversial alternative to fractional banking. Has the IMF actually imposed it on anyone it lends to? And has it insisted that reserves have to be U$ denominated? My memory gets ever more like a Swiss cheese, but I seem to remember that Argentina after its default agreed to go one step beyond a fixed exchange rate and institute a currency board. The currency board fell apart in 2002 (I think). Like monetary union in the EU, a currency board can be a very bad idea, although slightly easier to get out of…The penny has finally dropped that this is what Penelope is referring to. After its default, Russia did not institute a currency board, but retained a (managed) floating exchange rate, in effect, inflation targeting. This is a reasonable and practical policy if the monetary authorities know their job. It gives the country some flexibility in adjusting to shocks (like a collapse in oil prices for an oil producer).

Ewan, I have posted the link to Starikov’s free, online book at least 20 times on this site. He shows you step-by-step the constitutional basis of the Russian’s Central Bank’s independence from the Russian govt. Thru the rules of the Fed/IMF system of which Russia is a member, she is categorized as “developing,” and hence is subject to the rule that she may not issue currency/credits except in an amount equal to her exports. Glazyev speaks of the necessity of issuing “liquidity”.

This is so counter-intuitive that I know it’s hard to believe. Read Starikov. Do you think all those countries who take the immense risk of borrowing from the West are just stupid? Why are they all in debt? Just because they mistakenly believe in the neoliberal economic theory that prevents issuing their own development credits? They are compelled by the IMF rules, as is Russia.

Penelope
I have tried to read Chapter 12 of his book (the one you were mainly referring to, I take it). No need to worry that it appears counter-intuitive. It is not only counter-intuitive, but false. I’m surprised he has an economics degree. It is important to know your enemy and not tilt at windmills. The US is out to nobble Russia and is using the international financial system to that end. Russia and its friends had better study how the system works. Juan C. Zarate, one of the architects of the US Treasury’s use (abuse) of the financial system to take down those the US deems enemies, has written a book boasting how it is done, “Treasury’s War”. It had better be read in conjunction with a primer on economics and finance, to inoculate against Starikov’s nonsense.

Russia is not part of the Fed system. It issues roubles in accord within its own fiscal spending decisions i.e. they have the power, not the money markets. Whether they know that or not is the question.

And that’s Michael Hudson’s point, I believe.

There is no such thing as an IMF system. The IMF is a bank that issues its own currency i.e. SDR’s that it pegs to a basket of other currencies.

I think it is fair to say that Russia and Russians are more wary of credit than any country or people on earth. I speak not from any firsthand knowledge but from the record. Russia has never accumulated debt like other developed nations. If others think this is wrong and the result is simply a matter of the lack of opportunity to get and use credit please let us know.

I believe whatever the reason is for the lack of debt and the seeming unwillingness to accumulate it this is the one single thing that is unacceptable to American elites and is the cause of Americas determination to crush Russia. Make no mistake, for America’s elites the goal is to crush any Russian government not willing to allow in the bankers and take on debt and thus join the neoliberal world.

The banking question is the litmus test for a leader if they want to really break free of the shackles of the globalists/NWO. Donbass was able to pull it off..that was quite hopeful. The Saker article a week ago or so regarding the Glazyev faction as surging in the media is encouraging as well.

That said, I don’t think Putin is in prime position to take not this beyond dangerous challenge. Russia still has debt, and 2 wars it is involved in. If it could win those outright and gain the full co-opertation of China they might be strong enough to make a serious move and Putin may not meet Kennedy’s fate.

The fifth columnists need to be degraded further, hopefully Putin is doing that. maybe the nationalizations of industry are something planned for over a period of years.

I think hope exists, but it would be utopian to think all the Russian atlanticists
will be gone next week.

This is exactly the platform I have been involved with for the past decade. The Monetary Reform movement as espoused by the American Monetary Institute. Privately controlled central banks and private banking in general have usurped the power of money creation; which they create almost out of thin air by issuing debt/loans. A truly Sovereign state must eliminate the private central banks and have their own Treasury Departments create money by spending it directly into the economy; interest free. Congressman Dennis Kucinich, prior to being jerrymandered out of the legislature here in the land of plutocracy, brought a bill before congress, the NEED ACT, which would have established such a system of money creation. It’s surely worth a look. As well as becoming aware of what money is. Those that control the creation of money control governments.

Some very interesting and insightful comments above, in response to a pair of wise economists and good people who understand that the Posturing Powers that Be have led the West on a path of ruination for themselves and others, and in many respects, even creation itself.

Quite agree that there are many functions in a society the control of which belong in the democratic or public realm, and not in the private or oligarchical realm. The primary control of the financial system ought surely to be a public utility, not a private privilege. The current private clique control of the global financial system is at the heart of the global human crisis.

That said, in the economy generally there are very different types of privatization, from the extremes of monopoly and intertwined, very concentrated, private ownership to extremely diverse ownership with decisive political nourishment of healthy competition.

And there are different forms of ‘public utility': for example, there is the question of a healthy vs unhealthy regulatory system, oversight.

In Canada, a little known book, about the experience of a long time employee of the national entity known as Health Canada, is titled “Corrupt to the Core’. Here the title perhaps overstates the situation a trifle, but not much from my own experience. A key problem identified was the appointment of people to key executive positions whose primary allegiance leaned towards corporate interests, and away from the broad public interest. One way this problem could perhaps be mitigated is by a more transparent, debated and democratic procedure for selecting the executives of key regulatory agencies.

Unless there is an effective social awareness of, and effective political and social resistance to the tendency for corporate power to metastasize, , powerful corporate interests will over time, inch by inch and leap by leap, acquire more influence within any more or less posturing as ‘democratic’ political system: via lobbyists, campaign contributions, media influence and control, etc.

One great coup that transnational corporations in many countries have achieved is to acquire ‘corporate personhood’, and thus political rights and powers and influence and advantages that are superhuman and decisive on behalf of private interest, not the public interest. The penalty for crime is often a fine which is regarded as the price of doing business. So, in addition to the key concept of the need for a financial system that serves as ‘public utility’ rather than ‘private financial Aladdin’s lamp’, the problem of the corporate juggernaut as an inherently self-serving super-person in law, and often antithetical to the deepest public and national good, is a fundamental problem.

Canuck,
Just a few thoughts.
Re: Lessening corporate power: Break large conglomerates into their individual companies. In early American times corporations existed at the people’s pleasure and could be disbanded if they did not perform in the people’s interest. That should probably be re-enacted for corporations of a certain size.

Re: Getting non-corrupt heads for our agencies like Health Canada, FDA, FCC, etc.: Allow the workers in each federal agency to elect their own chief or triumvirate, rather than permitting corrupt political appointees. Of course by secret ballot.

I think that people everywhere ought to start getting together a political platform of what we want. Having specific intentions is a great motivator. By enlarge we want sovereign nations that the people control. Surely we ought to start thinking about the means by which this will be accomplished After The Revolution (ATR). Public financing of campaigns and a totally nonconcentrated media. What else?

” the latest privatization plan is a direct attack by the Russian 5th column against President Putin and against Russia. ”

Maybe so. But contrary to Paul Craig Robert and Michael Hudson, crimson_alter, a fine Russian blogger, has read the small print of the relevant documents, and comes to a quite different – and for some very surprising – conclusion. A must read!

“… if the shares are bought by a Russian firm under the scrutiny of Russian law, then all of the subsequent conflicts with the state or potential expropriations will be dealt with in accordance with Russian law, with the Russian holding company being a party to the proceedings. this makes the Yukos situation, where the shares were held to foreign offshore firms, impossible to be repeat.

So it turns out that the only foreign investors who will participate in the privatization are those who are not afraid of Russian law and are not afraid to play in accordance with the rules set by the Russian state.”

“… The state retains control over the enterprises, which Putin clearly stated. Overall, the oligarchs are being compelled to put their money into the budget and also invest in firms where they will be minority shareholders”

And the “lucky” oligarch-buyer of this minority stake in a Russian state company, issued under Russian law, at a strike price far above market value, also “wins” the right to wash windows at the Kremlin..

U.S. goverment is not crearing its own money. Now everyone shouod know that U.S. gov. is borrowing money from the “Federal Reserve System”, private, foreigh (Rotschild & co.) cartel. Just see whose notes are on your dollar bills; “Federal Reserve Notes”.
So if Russian gov. would allow private bank to creare money, Rubles, it’d meant to get under financial control of some crypto mafiosos, same as in U.S. case.removed. No insulting or baiting guest author. Mod TR …

Anonymous, No one’s suggesting that some other private bank in addition to the Fed should be empowered to have money created. MMT (Modern Monetary Theory) says the govt should issue its own interest-free money– as in the constitution.

Fractional reserve banking with its perverse incentive to commercial banks to create money and to destroy money serving their business model instead of society is the core reason for the boom bust cycle of capitalist economies.
A moral question too why would a society grant commercial banks to create money?
Iceland has with “sovereign money” a quite different approach, but Iceland also recovered spectacularly after the last crises even after rejecting IMF “assistance” and also jailed 22 bankers for up to 70 years in total.https://eng.forsaetisraduneyti.is/media/Skyrslur/monetary-reform.pdf

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